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Publication 515
(Rev. April 2008) Contents
Cat. No. 15019L
What’s New . . . . . . . . . . . . . . . . . . . . . 2
Department
of the Reminders . . . . . . . . . . . . . . . . . . . . . . 2
Treasury
Internal
Withholding Introduction . . . . . . . . . . . . . . . . . . . . . 2

Revenue Withholding of Tax . . . . . . . . . . . . . . . . 3

Service
of Tax on Withholding Agent . . . . . . . . . . . . . .
Withholding and Reporting
3

Nonresident Obligations . . . . . . . . . . . . . . . .
Persons Subject to NRA
4

Withholding . . . . . . . . . . . . . . . . . . 4
Aliens and Identifying the Payee . . . . . . . . . . . .
Foreign Persons . . . . . . . . . . . . . . .
4
6

Foreign Documentation . . . . . . . . . . . . . . . . . .
Beneficial Owners . . . . . . . . . . . . . .
7
8

Entities Foreign Intermediaries and

Foreign Flow-Through
Entities . . . . . . . . . . . . . . . . . . . 9
Standards of Knowledge . . . . . . . . . . 12
Presumption Rules . . . . . . . . . . . . . . 14
Income Subject to NRA
For Withholding in 2008 Withholding . . . . . . . . . . . . . . . . . . 14
Source of Income . . . . . . . . . . . . . . . 14
Fixed or Determinable Annual or
Periodical Income . . . . . . . . . . . . 15
Withholding on Specific Income . . . . . . 16
Effectively Connected Income . . . . . . 16
Income Not Effectively
Connected . . . . . . . . . . . . . . . . 17
Pay for Personal Services
Performed . . . . . . . . . . . . . . . . . 22
Artists and Athletes . . . . . . . . . . . . . 27
Other Income . . . . . . . . . . . . . . . . . 27
Foreign Governments and Certain
Other Foreign Organizations . . . . . . 28
U.S. Taxpayer Identification
Numbers . . . . . . . . . . . . . . . . . . . . 28
Depositing Withheld Taxes . . . . . . . . . . 29
Returns Required . . . . . . . . . . . . . . . . . 30
Partnership Withholding on
Effectively Connected Income . . . . . 31
U.S. Real Property Interest . . . . . . . . . . 33
Tax Treaty Tables . . . . . . . . . . . . . . . . . 36
Table 1. Withholding Tax Rates
on Income Other Than
Personal Service
Income — For Withholding in
2008 . . . . . . . . . . . . . . . . . . . . 38
Table 2. Compensation for
Personal Services Performed
in United States Exempt from
Withholding and U.S. Income
Tax Under Income Tax
Get forms and other information Treaties . . . . . . . . . . . . . . . . . . 42
faster and easier by: Table 3. List of Tax Treaties . . . . . . . . 54

Internet • www.irs.gov How To Get Tax Help . . . . . . . . . . . . . . 55

Index . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Page 2 of 58 of Publication 515
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What’s New
Qualified intermediaries. A branch of a fi-
nancial institution may not act as a qualified
intermediary in a country that does not have
approved know-your-customer rules. See Quali-
fied intermediary under Foreign Intermediaries.
U.S. real property interest. The rules related
to distributions of the gain from the disposition of
a U.S. real property interest by a mutual fund or
other regulated investment company (RIC) have
been modified. See U.S. Real Property Interest,
for more information.
Interest-related dividends and short-term
capital gain dividends received from mutual
funds. For tax years beginning after 2007, the
exemption from withholding on certain inter-
est-related dividends and short-term capital gain
dividends paid by a mutual fund or other regu-
lated investment company will no longer apply.
Portfolio interest paid to 10% owners. New
rules establish when the 10% ownership test
applies to interest distributions that may other-
wise qualify as portfolio interest. These rules
can be found in section 1.871-14(g) of the regu-
lations.
New treaty and protocols. The United States
has exchanged instruments of ratification for a
new income tax treaty with Belgium and new
protocols with Denmark, Finland, and Germany.
Belgium. The provisions relating to with-
holding tax at source are effective for amounts
paid or credited on or after February 1, 2008. For
other taxes, the treaty is effective for tax periods
beginning on or after January 1, 2008. A person
entitled to benefits under the previous treaty can
elect to have that treaty apply in its entirety for a
twelve-month period following the date the new
treaty would otherwise apply.
Denmark. The provisions relating to with-
holding tax at source are effective for amounts
paid or credited on or after February 1, 2008. For
other taxes, the protocol is effective for tax peri-
ods beginning on or after January 1, 2008.
Finland. The provisions relating to withhold-
ing tax at source are effective for amounts paid
or credited on or after February 1, 2008. How-
ever, the provisions for dividends covered by
footnotes oo and ss in Table 1 (at the end of this
publication), are effective January 1, 2007. For
other taxes, the protocol is effective for tax years
beginning on or after January 1, 2008.
Germany. The provisions relating to with-
holding tax at source are effective for amounts
paid or credited on or after January 1, 2007. For
other taxes, the treaty is effective for tax years
beginning on or after January 1, 2008. A person
entitled to benefits under the treaty before modi-
fication by this protocol can elect to have the
unmodified treaty apply in its entirety for a
twelve-month period following the date the pro-
tocol would otherwise apply.
Magnetic media. Beginning with tax year
2008, processing year 2009, the IRS will no
longer accept tape cartridges. You will not be
able to use magnetic media to file Form 1042-S.
Page 2
Reminders
Note. This publication serves as the Small En-
tity Compliance Guide required by section 212
of the Small Business Regulatory Enforcement
Fairness Act of 1996, P.L. 104-121.
Form W-8. There are four forms in the W-8
series. The form to use depends on the type of
certification being made. As used in this publica-
tion, the term “Form W-8” refers to the appropri-
ate document. For more information, see
Documentation, later.
Electronic deposit rules. You must use the
Electronic Federal Tax Payment System
(EFTPS) to make electronic deposits of all de-
pository tax liabilities you incur after 2007, if you
meet either of the following conditions.
• You had to make electronic deposits in
2007.
• You deposited more than $200,000 in fed-
eral depository taxes in 2006.
If you do not meet these conditions, electronic
deposits are voluntary.
For more information about depositing elec-
tronically, see Publication 966, The Secure Way
to Pay Your Federal Taxes.
Filing electronically. If you file Form 1042-S
electronically, you will use the Filing Information
Returns Electronically (FIRE) system. You get to
the system through the Internet at fire.irs.gov.
For files submitted on the FIRE system, it is
the responsibility of the filer to verify the results
of the transmission within 5 business days. The
IRS will not mail error reports for files that are
bad.
IRS taxpayer identification numbers for
aliens. The IRS will issue an individual tax-
payer identification number (ITIN) to an alien
who does not have and is not eligible to get a
social security number (SSN).
An ITIN is for tax use only. It does not entitle
an alien to social security benefits or change his
or her employment or immigration status under
U.S. law.
For more information on ITINs, see U.S. Tax-
payer Identification Numbers, later.
Real estate mortgage investment conduits
(REMIC). Excess inclusion income is treated
as income from sources in the United States.
The date an excess inclusion allocated to a
foreign person by certain pass-through entities
is subject to withholding is, generally, the close
of the entity’s tax year. An excess inclusion is
not eligible for any reduction in withholding tax
(by treaty or otherwise). See REMIC excess
inclusions.
Partnership withholding on effectively con-
nected income (ECI). A partnership must
withhold tax on ECI allocated to a foreign part-
ner. However, a publicly traded partnership
(PTP) cannot elect to withhold tax based on ECI
allocable to its foreign partners. The PTP must
withhold on the distribution of that income to its
foreign partners.
For more information, see Publicly Traded
Partnerships under Partnership Withholding on
Effectively Connected Income.
11:14 - 23-APR-2008
Dematerialized book-entry systems. Under
these systems, bonds are required to be repre-
sented only by book entries. Generally, these
bonds are considered to be in registered form.
See Reduced Rates of Withholding on Interest.
Photographs of missing children. The Inter-
nal Revenue Service is a proud partner with the
National Center for Missing and Exploited Chil-
dren. Photographs of missing children selected
by the Center may appear in this publication on
pages that would otherwise be blank. You can
help bring these children home by looking at the
photographs and calling 1-800-THE-LOST
(1-800-843-5678) if you recognize a child.
Introduction
This publication is for withholding agents who
pay income to foreign persons, including non-
resident aliens, foreign corporations, foreign
partnerships, foreign trusts, foreign estates, for-
eign governments, and international organiza-
tions. Specifically, it describes the persons
responsible for withholding (withholding
agents), the types of income subject to withhold-
ing, and the information return and tax return
filing obligations of withholding agents. In addi-
tion to discussing the rules that apply generally
to payments of U.S. source income to foreign
persons, it also contains sections on the with-
holding that applies to the disposition of U.S.
real property interests and the withholding by
partnerships on income effectively connected
with the active conduct of a U.S. trade or busi-
ness.
Comments and suggestions. We welcome
your comments about this publication and your
suggestions for future editions.
You can write to us at the following address:
Internal Revenue Service
Individual Forms and Publications Branch
SE:W:CAR:MP:T:I
1111 Constitution Ave. NW, IR-6526
Washington, DC 20224
We respond to many letters by telephone.
Therefore, it would be helpful if you would in-
clude your daytime phone number, including the
area code, in your correspondence.
You can email us at *taxforms@irs.gov. (The
asterisk must be included in the address.)
Please put “Publications Comment” on the sub-
ject line. Although we cannot respond individu-
ally to each email, we do appreciate your
feedback and will consider your comments as
we revise our tax products.
Ordering forms and publications. Visit
www.irs.gov/formspubs to download forms and
publications, call 1-800-829-3676, or write to the
address below and receive a response within 10
days after your request is received.
National Distribution Center
P.O. Box 8903
Bloomington, IL 61702-8903
Tax questions. If you have a tax question,
check the information available on www.irs.gov
Publication 515 (April 2008)
Page 3 of 58 of Publication 515
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or call 1-800-829-1040. We cannot answer tax
questions sent to either of the above addresses.
Useful Items
You may want to see:
Publication
❏ 15 (Circular E), Employer’s Tax Guide
❏ 15-A Employer’s Supplemental Tax
Guide
❏ 15-B Employer’s Tax Guide to Fringe
Benefits
❏ 51 (Circular A), Agricultural Employer’s
Tax Guide
❏ 519 U.S. Tax Guide for Aliens
❏ 901 U.S. Tax Treaties
Form (and Instructions)
❏ SS-4 Application for Employer
Identification Number
❏ W-2 Wage and Tax Statement
❏ W-4 Employee’s Withholding Allowance
Certificate
❏ W-4P Withholding Certificate for Pension
or Annuity Payments
❏ W-7 Application for IRS Individual
Taxpayer Identification Number
❏ W-8BEN Certificate of Foreign Status of
Beneficial Owner for United States
Tax Withholding
❏ W-8ECI Certificate of Foreign Person’s
Claim That Income Is Effectively
Connected With the Conduct of a
Trade or Business in the United
States
❏ W-8EXP Certificate of Foreign
Government or Other Foreign
Organization for United States
Withholding
❏ W-8IMY Certificate of Foreign
Intermediary, Foreign Flow-Through
Entity, or Certain U.S. Branches for
United States Tax Withholding
❏ 941 Employer’s Quarterly Federal Tax
Return
❏ 1042 Annual Withholding Tax Return for
U.S. Source Income of Foreign
Persons
❏ 1042-S Foreign Person’s U.S. Source
Income Subject to Withholding
❏ 1042-T Annual Summary and Transmittal
of Forms 1042-S
See How To Get Tax Help, at the end of this
publication for information about getting publica-
tions and forms.
Withholding of Tax
Generally, a foreign person is subject to U.S. tax
on its U.S. source income. Most types of U.S.
source income received by a foreign person are
subject to U.S. tax of 30%. A reduced rate,
including exemption, may apply if there is a tax
Publication 515 (April 2008)
treaty between the foreign person’s country of
residence and the United States. The tax is
generally withheld (NRA withholding) from the
payment made to the foreign person.
The term “NRA withholding” is used in this
publication descriptively to refer to withholding
required under sections 1441, 1442, and 1443
of the Internal Revenue Code. Generally, NRA
withholding describes the withholding regime
that requires withholding on a payment of U.S.
source income. Payments to foreign persons,
including nonresident alien individuals, foreign
entities and governments, may be subject to
NRA withholding.
NRA withholding does not include with-
! holding under section 1445 of the Code
CAUTION
(see U.S. Real Property Interest, later)
or under section 1446 of the Code (see Partner-
ship Withholding on Effectively Connected In-
come, later).
A withholding agent (defined next) is the per-
son responsible for withholding on payments
made to a foreign person. However, a withhold-
ing agent that can reliably associate the pay-
ment with documentation (discussed later) from
a U.S. person is not required to withhold. In
addition, a withholding agent may apply a re-
duced rate of withholding (including an exemp-
tion from withholding) if it can reliably associate
the payment with documentation from a benefi-
cial owner that is a foreign person entitled to a
reduced rate of withholding.
Withholding Agent
You are a withholding agent if you are a U.S. or
foreign person that has control, receipt, custody,
disposal, or payment of any item of income of a
foreign person that is subject to withholding. A
withholding agent may be an individual, corpora-
tion, partnership, trust, association, nominee
(under section 1446 of the Code), or any other
entity, including any foreign intermediary, for-
eign partnership, or U.S. branch of certain for-
eign banks and insurance companies. You may
be a withholding agent even if there is no re-
quirement to withhold from a payment or even if
another person has withheld the required
amount from the payment.
Although several persons may be withhold-
ing agents for a single payment, the full tax is
required to be withheld only once. Generally, the
U.S. person who pays an amount subject to
NRA withholding is the person responsible for
withholding. However, other persons may be
required to withhold. For example, a payment
made by a flow-through entity or nonqualified
intermediary that knows, or has reason to know,
that the full amount of NRA withholding was not
done by the person from which it receives a
payment is required to do the appropriate with-
holding since it also falls within the definition of a
withholding agent. In addition, withholding must
be done by any qualified intermediary, withhold-
ing foreign partnership, or withholding foreign
trust in accordance with the terms of its withhold-
ing agreement, discussed later.
Liability for tax. As a withholding agent, you
are personally liable for any tax required to be
withheld. This liability is independent of the tax
liability of the foreign person to whom the pay-
ment is made. If you fail to withhold and the
foreign payee fails to satisfy its U.S. tax liability,
11:14 - 23-APR-2008
then both you and the foreign person are liable
for tax, as well as interest and any applicable
penalties.
The applicable tax will be collected only
once. If the foreign person satisifies its U.S. tax
liability, you are not liable for the tax but remain
liable for any interest and penalties for failure to
withhold.
Determination of amount to withhold. You
must withhold on the gross amount subject to
NRA withholding. You cannot reduce the gross
amount by any deductions. However, see Schol-
arships and Fellowship Grants, and Pay for Per-
sonal Services Performed, later, for when a
deduction for a personal exemption may be al-
lowed.
If the determination of the source of the in-
come or the amount subject to tax depends on
facts that are not known at the time of payment,
you must withhold an amount sufficient to en-
sure that at least 30% of the amount subse-
quently determined to be subject to withholding
is withheld. In no case, however, should you
withhold more than 30% of the total amount
paid. Or, you may make a reasonable estimate
of the amount from U.S. sources and put a
corresponding portion of the amount due in es-
crow until the amount from U.S. sources can be
determined, at which time withholding becomes
due.
When to withhold. Withholding is required at
the time you make a payment of an amount
subject to withholding. A payment is made to a
person if that person realizes income whether or
not there is an actual transfer of cash or other
property. A payment is considered made to a
person if it is paid for that person’s benefit. For
example, a payment made to a creditor of a
person in satisfaction of that person’s debt to the
creditor is considered made to the person. A
payment is also considered made to a person if
it is made to that person’s agent.
A U.S. partnership should withhold when any
distributions that include amounts subject to
withholding are made. However, if a foreign
partner’s distributive share of income subject to
withholding is not actually distributed, the U.S.
partnership must withhold on the foreign part-
ner’s distributive share of the income on the
earlier of the date that a Schedule K-1 (Form
1065) is provided or mailed to the partner or the
due date for furnishing that schedule. If the dis-
tributable amount consists of effectively con-
nected income, see Partnership Withholding on
Effectively Connected Income, later.
A U.S. trust is required to withhold on the
amount includible in the gross income of a for-
eign beneficiary to the extent the trust’s distribut-
able net income consists of an amount subject to
withholding. To the extent a U.S. trust is required
to distribute an amount subject to withholding
but does not actually distribute the amount, it
must withhold on the foreign beneficiary’s allo-
cable share at the time the income is required to
be reported on Form 1042-S.
Withholding and
Reporting Obligations
You are required to report payments subject to
NRA withholding on Form 1042-S and to file a
tax return on Form 1042. (See Returns Re-
quired, later.) An exception from reporting may
Page 3
Page 4 of 58 of Publication 515
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apply to individuals who are not required to with-
hold from a payment and who do not make the
payment in the course of their trade or business.
Form 1099 reporting and backup withhold-
ing. You may also be responsible as a payer
for reporting on Form 1099 payments made to a
U.S. person. You must withhold 28% (backup
withholding rate) from a reportable payment
made to a U.S. person that is subject to Form
1099 reporting if (1) the U.S. person has not
provided its taxpayer identification number (TIN)
in the manner required, (2) the IRS notifies you
that the TIN furnished by the payee is incorrect,
(3) there has been a notified payee underreport-
ing, or (4) there has been a payee certification
failure. Generally, a TIN must be provided by a
U.S. non-exempt recipient on Form W-9. A
payer files a tax return on Form 945 for backup
withholding.
You may be required to file Form 1099, and,
if appropriate, backup withhold, even if you do
not make the payments directly to that U.S.
person. For example, you are required to report
income paid to a foreign intermediary or
flow-through entity that collects for a U.S. per-
son subject to Form 1099 reporting. See Identi-
fying the Payee, later, for more information. Also
see Section S. Special Rules for Reporting Pay-
ments Made Through Foreign Intermediaries
and Foreign Flow-Through Entities on Form
1099 in the General Instructions for Forms 1099,
1098, 5498, and W-2G.
Foreign persons who provide Form
TIP W-8BEN, Form W-8ECI, or Form
W-8EXP (or applicable documentary
evidence) are exempt from backup withholding
and Form 1099 reporting.
Wages paid to employees. If you are the
employer of a nonresident alien, you may have
to withhold taxes at graduated rates. See Pay for
Personal Services Performed, later.
Effectively connected income by partner-
ships. A withholding agent that is a partner-
ship (whether U.S. or foreign) is also
responsible for withholding on its income effec-
tively connected with a U.S. trade or business
that is allocable to foreign partners. See Partner-
ship Withholding on Effectively Connected In-
come, later, for more information.
U.S. real property interest. A withholding
agent may also be responsible for withholding if
a foreign person transfers a U.S. real property
interest to the agent, or if it is a corporation,
partnership, trust, or estate that distributes a
U.S. real property interest to a shareholder, part-
ner, or beneficiary that is a foreign person. See
U.S. Real Property Interest, later.
Persons Subject to
NRA Withholding
NRA withholding applies only to payments made
to a payee that is a foreign person. It does not
apply to payments made to U.S. persons.
Usually, you determine the payee’s status as
a U.S. or foreign person based on the documen-
tation that person provides. See Documenta-
tion, later. However, if you have received no
documentation or you cannot reliably associate
Page 4
all or a portion of a payment with documentation,
then you must apply certain presumption rules,
discussed later.
Identifying the Payee
Generally, the payee is the person to whom you
make the payment, regardless of whether that
person is the beneficial owner of the income.
However, there are situations in which the
payee is a person other than the one to whom
you actually make a payment.
U.S. agent of foreign person. If you make a
payment to a U.S. person and you have actual
knowledge that the U.S. person is receiving the
payment as an agent of a foreign person, you
must treat the payment as made to the foreign
person. However, if the U.S. person is a financial
institution, you may treat the institution as the
payee provided you have no reason to believe
that the institution will not comply with its own
obligation to withhold.
If the payment is not subject to NRA with-
holding (for example, gross proceeds from the
sales of securities), you must treat the payment
as made to a U.S. person and not as a payment
to a foreign person. You may be required to
report the payment on Form 1099 and, if appli-
cable, backup withhold.
Disregarded entities. A business entity that
is not a corporation and that has a single owner
may be disregarded as an entity separate from
its owner (a disregarded entity) for federal tax
purposes. The payee of a payment made to a
disregarded entity is the owner of the entity.
If the owner of the entity is a foreign person,
you must apply NRA withholding unless you can
treat the foreign owner as a beneficial owner
entitled to a reduced rate of withholding.
If the owner is a U.S. person, you do not
apply NRA withholding. However, you may be
required to report the payment on Form 1099
and, if applicable, backup withhold. You may
assume that a foreign entity is not a disregarded
entity unless you can reliably associate the pay-
ment with documentation provided by the owner
or you have actual knowledge or reason to know
that the foreign entity is a disregarded entity.
Flow-Through Entities
The payees of payments (other than income
effectively connected with a U.S. trade or busi-
ness) made to a foreign flow-through entity are
the owners or beneficiaries of the flow-through
entity. This rule applies for purposes of NRA
withholding and for Form 1099 reporting and
backup withholding. Income that is, or is
deemed to be, effectively connected with the
conduct of a U.S. trade or business of a
flow-through entity, is treated as paid to the
entity.
All of the following are flow-through entities.
• A foreign partnership (other than a with-
holding foreign partnership).
• A foreign simple or foreign grantor trust
(other than a withholding foreign trust).
• A fiscally transparent entity receiving in-
come for which treaty benefits are
claimed. See Fiscally transparent entity,
later.
11:14 - 23-APR-2008
Generally, you treat a payee as a flow-through
entity if it provides you with a Form W-8IMY (see
Documentation, later) on which it claims such
status. You may also be required to treat the
entity as a flow-through entity under the pre-
sumption rules, discussed later.
You must determine whether the owners or
beneficiaries of a flow-through entity are U.S. or
foreign persons, how much of the payment re-
lates to each owner or beneficiary, and, if the
owner or beneficiary is foreign, whether a re-
duced rate of NRA withholding applies. You
make these determinations based on the docu-
mentation and other information (contained in a
withholding statement) that is associated with
the flow-through entity’s Form W-8IMY. If you do
not have all of the information that is required to
reliably associate a payment with a specific
payee, you must apply the presumption rules.
See Documentation and Presumption Rules,
later.
Withholding foreign partnerships and with-
holding foreign trusts are not flow-through enti-
ties.
Foreign partnerships. A foreign partnership
is any partnership that is not organized under
the laws of any state of the United States or the
District of Columbia or any partnership that is
treated as foreign under the income tax regula-
tions. If a foreign partnership is not a withholding
foreign partnership, the payees of income are
the partners of the partnership, provided the
partners are not themselves a flow-through en-
tity or a foreign intermediary. However, the
payee is the partnership itself if the partnership
is claiming treaty benefits on the basis that it is
not fiscally transparent and that it meets all the
other requirements for claiming treaty benefits. If
a partner is a foreign flow-through entity or a
foreign intermediary, you apply the payee deter-
mination rules to that partner to determine the
payees.
Example 1. A nonwithholding foreign part-
nership has three partners: a nonresident alien
individual; a foreign corporation; and a U.S. citi-
zen. You make a payment of U.S. source inter-
est to the partnership. It gives you a Form
W-8IMY with which it associates Forms
W-8BEN from the nonresident alien and the
foreign corporation and a Form W-9 from the
U.S. citizen. The partnership also gives you a
complete withholding statement that enables
you to associate a portion of the interest pay-
ment to each partner.
You must treat all three partners as the pay-
ees of the interest payment as if the payment
were made directly to them. Report the payment
to the nonresident alien and the foreign corpora-
tion on Forms 1042-S. Report the payment to
the U.S. citizen on Form 1099-INT.
Example 2. A nonwithholding foreign part-
nership has two partners: a foreign corporation,
and a nonwithholding foreign partnership. The
second partnership has two partners, both non-
resident alien individuals. You make a payment
of U.S. source interest to the first partnership. It
gives you a valid Form W-8IMY with which it
associates a Form W-8BEN from the foreign
corporation and a Form W-8IMY from the sec-
ond partnership. In addition, Forms W-8BEN
from the partners are associated with the Form
W-8IMY from the second partnership. The
Publication 515 (April 2008)
Page 5 of 58 of Publication 515
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Forms W-8IMY from the partnerships have com-
plete withholding statements associated with
them. Because you can reliably associate a por-
tion of the interest payment with the Forms
W-8BEN provided by the foreign corporation
and the nonresident alien individual partners as
a result of the withholding statements, you must
treat them as the payees of the interest.
Example 3. You make a payment of U.S.
source dividends to a withholding foreign part-
nership. The partnership has two partners, both
foreign corporations. You can reliably associate
the payment with a valid Form W-8IMY from the
partnership on which it represents that it is a
withholding foreign partnership. You must treat
the partnership as the payee of the dividends.
Foreign simple and grantor trust. A trust is
foreign unless it meets both the following tests.
• A court within the United States is able to
exercise primary supervision over the ad-
ministration of the trust.
• One or more U.S. persons have the au-
thority to control all substantial decisions
of the trust.
Generally, a foreign simple trust is a foreign
trust that is required to distribute all of its income
annually. A foreign grantor trust is a foreign trust
that is treated as a grantor trust under sections
671 through 679 of the Code.
The payees of a payment made to a foreign
simple trust are the beneficiaries of the trust.
The payees of a payment made to a foreign
grantor trust are the owners of the trust. How-
ever, the payee is the foreign simple or grantor
trust itself if the trust is claiming treaty benefits
on the basis that it is not fiscally transparent and
that it meets all the other requirements for claim-
ing treaty benefits. If the beneficiaries or owners
are themselves flow-through entities or foreign
intermediaries, you apply the payee determina-
tion rules to that beneficiary or owner to deter-
mine the payees.
Example. A foreign simple trust has three
beneficiaries: a nonresident alien individual; a
foreign corporation; and a U.S. citizen. You
make a payment of interest to the foreign trust. It
gives you a Form W-8IMY with which it associ-
ates Forms W-8BEN from the nonresident alien
and the foreign corporation and a Form W-9
from the U.S. citizen. The trust also gives you a
complete withholding statement that enables
you to associate a portion of the interest pay-
ment with the forms provided by each benefi-
ciary. You must treat all three beneficiaries as
the payees of the interest payment as if the
payment were made directly to them. Report the
payment to the nonresident alien and the foreign
corporation on Forms 1042-S. Report the pay-
ment to the U.S. citizen on Form 1099-INT.
Fiscally transparent entity. If a reduced rate
of withholding under an income tax treaty is
claimed, a flow-through entity includes any en-
tity in which the interest holder must treat the
entity as fiscally transparent. The determination
of whether an entity is fiscally transparent is
made on an item of income basis (that is, the
determination is made separately for interest,
dividends, royalties, etc.). The interest holder in
an entity makes the determination by applying
the laws of the jurisdiction where the interest
Publication 515 (April 2008)
holder is organized, incorporated, or otherwise
considered a resident. An entity is considered to
be fiscally transparent for the income to the
extent the laws of that jurisdiction require the
interest holder to separately take into account
on a current basis the interest holder’s share of
the income, whether or not distributed to the
interest holder, and the character and source of
the income to the interest holder are determined
as if the income was realized directly from the
source that paid it to the entity. Subject to the
standards of knowledge rules discussed later,
you generally make the determination that an
entity is fiscally transparent based on a Form
W-8IMY provided by the entity.
The payees of a payment made to a fiscally
transparent entity are the interest holders of the
entity.
Example. Entity A is a business organiza-
tion organized under the laws of country X that
has an income tax treaty in effect with the United
States. A has two interest holders, B and C. B is
a corporation organized under the laws of coun-
try Y. C is a corporation organized under the
laws of country Z. Both countries Y and Z have
an income tax treaty in effect with the United
States.
A receives royalty income from U.S. sources
that is not effectively connected with the conduct
of a trade or business in the United States. For
U.S. income tax purposes, A is treated as a
partnership. Country X treats A as a partnership
and requires the interest holders in A to sepa-
rately take into account on a current basis their
respective shares of the income paid to A even if
the income is not distributed. The laws of coun-
try X provide that the character and source of the
income to A’s interest holders are determined as
if the income was realized directly from the
source that paid it to A. Accordingly, A is fiscally
transparent in its jurisdiction, country X.
B and C are not fiscally transparent under the
laws of their respective countries of incorpora-
tion. Country Y requires B to separately take into
account on a current basis B’s share of the
income paid to A, and the character and source
of the income to B is determined as if the income
was realized directly from the source that paid it
to A. Accordingly, A is fiscally transparent for
that income under the laws of country Y, and B is
treated as deriving its share of the U.S. source
royalty income for purposes of the U.S.-Y in-
come tax treaty. Country Z, on the other hand,
treats A as a corporation and does not require C
to take into account its share of A’s income on a
current basis whether or not distributed. There-
fore, A is not treated as fiscally transparent
under the laws of country Z. Accordingly, C is
not treated as deriving its share of the U.S.
source royalty income for purposes of the U.S.-Z
income tax treaty.
Foreign Intermediaries
Generally, if you make payments to a foreign
intermediary, the payees are the persons for
whom the foreign intermediary collects the pay-
ment, such as account holders or customers,
not the intermediary itself. This rule applies for
purposes of NRA withholding and for Form 1099
reporting and backup withholding. You may,
however, treat a qualified intermediary that has
assumed primary withholding responsibility for a
11:14 - 23-APR-2008
payment as the payee, and you are not required
to withhold.
An intermediary is a custodian, broker, nomi-
nee, or any other person that acts as an agent
for another person. A foreign intermediary is
either a qualified intermediary or a nonqualified
intermediary. Generally, you determine whether
an entity is a qualified intermediary or a nonqual-
ified intermediary based on the representations
the intermediary makes on Form W-8IMY.
You must determine whether the customers
or account holders of a foreign intermediary are
U.S. or foreign persons, and, if the account
holder or customer is foreign, whether a reduced
rate of NRA withholding applies. You make
these determinations based on the foreign inter-
mediary’s Form W-8IMY and associated infor-
mation and documentation. If you do not have all
of the information or documentation that is re-
quired to reliably associate a payment with a
payee, you must apply the presumption rules.
See Documentation and Presumption Rules,
later.
Nonqualified intermediary. A nonqualified
intermediary (NQI) is any intermediary that is a
foreign person and that is not a qualified inter-
mediary. The payees of a payment made to an
NQI are the customers or account holders on
whose behalf the NQI is acting.
Example. You make a payment of interest
to a foreign bank that is a nonqualified intermedi-
ary. The bank gives you a Form W-8IMY and the
Forms W-8BEN of two foreign persons, and a
Form W-9 from a U.S. person for whom the bank
is collecting the payments. The bank also asso-
ciates with its Form W-8IMY a withholding state-
ment on which it allocates the interest payment
to each account holder and provides all other
information required to be on the withholding
statement. The account holders are the payees
of the interest payment. You should report the
portion of the interest paid to the two foreign
persons on Forms 1042-S and the portion paid
to the U.S. person on Form 1099-INT.
Qualified intermediary. A qualified intermedi-
ary (QI) is any foreign intermediary (or foreign
branch of a U.S. intermediary) that has entered
into a qualified intermediary withholding agree-
ment (discussed later) with the IRS. You may
treat a QI as a payee to the extent the QI as-
sumes primary withholding responsibility or pri-
mary Form 1099 reporting and backup
withholding responsibility for a payment. In this
situation, the QI is required to withhold the tax.
You can determine whether a QI has assumed
responsibility from the Form W-8IMY provided
by the QI.
A payment to a QI to the extent it does not
assume primary NRA withholding responsibility
is considered made to the person on whose
behalf the QI acts. If a QI does not assume Form
1099 reporting and backup withholding respon-
sibility, you must report on Form 1099 and, if
applicable, backup withhold as if you were mak-
ing the payment directly to the U.S. person.
Branches of financial institutions.
Branches of financial institutions are not permit-
ted to operate as QIs if they are located outside
of countries having approved
“know-your-customer” (KYC) rules. The coun-
tries with approved KYC rules are listed on the
IRS website at www.irs.gov.
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QI withholding agreement. Foreign finan-
cial institutions and foreign branches of U.S.
financial institutions can enter into an agreement
with the IRS to be a qualified intermediary. A QI
is entitled to certain simplified withholding and
reporting rules. In general, there are three major
areas whereby intermediaries with QI status are
afforded such simplified treatment.
The QI withholding agreement and proce-
dures necessary to complete the QI application
are set forth in Revenue Procedure 2000-12
found on page 387 of Internal Revenue Bulletin
(I.R.B.) 2000-4 at www.irs.gov/pub/irs-irbs/
irb00 – 04.pdf. Also see the following items.
• Notice 2001-4 (I.R.B. 2001-2).
• Revenue Procedure 2003-64, Appendix 3
(I.R.B. 2003-32).
• Revenue Procedure 2004-21 (I.R.B.
2004-14).
• Revenue Procedure 2005-77 (I.R.B.
2005-51).
Documentation. A QI is not required to for-
ward documentation obtained from foreign ac-
count holders to the U.S. withholding agent from
whom the QI receives a payment of U.S. source
income. The QI maintains such documentation
at its location and provides the U.S. withholding
agent with withholding rate pools. A withholding
rate pool is a payment of a single type of income
that is subject to a single rate of withholding.
A QI is required to provide the U.S. withhold-
ing agent with information regarding U.S. per-
sons subject to Form 1099 information reporting
unless the QI assumes the primary obligation to
do Form 1099 reporting and backup withholding.
If a QI obtains documentary evidence under
the “know your customer” rules that apply to the
QI under local law, and the documentary evi-
dence is of a type specified in an attachment to
the QI agreement, the documentary evidence
remains valid until there is a change in circum-
stances or the QI knows the information is incor-
rect. This indefinite validity period rule does not
apply to Forms W-8 or to documentary evidence
that is not of the type specified in the attachment
to the agreement.
Form 1042-S reporting. A QI is permitted
to report payments made to its direct foreign
account holders on a pooled basis rather than
reporting payments to each direct account
holder specifically. Pooled basis reporting is not
available for payments to certain account hold-
ers, such as a nonqualified intermediary or a
flow-through entity (discussed earlier).
Collective refund procedures. A QI may
seek a refund on behalf of its direct account
holders. The direct account holders, therefore,
are not required to file returns with the IRS to
obtain refunds, but rather may obtain them from
the QI.
U.S. branches of foreign banks and foreign
insurance companies. Special rules apply to
a U.S. branch of a foreign bank subject to Fed-
eral Reserve Board supervision or a foreign in-
surance company subject to state regulatory
supervision. If you agree to treat the branch as a
U.S. person, you may treat the branch as a U.S.
payee for a payment subject to NRA withholding
provided you receive a Form W-8IMY from the
Page 6
U.S. branch on which the agreement is evi-
denced. If you treat the branch as a U.S. payee,
you are not required to withhold. Even though
you agree to treat the branch as a U.S. person,
you must report the payment on Form 1042-S.
A financial institution organized in a U.S.
possession is treated as a U.S. branch. The
special rules discussed in this section apply to a
possessions financial institution.
If you are paying a U.S. branch an amount
that is not subject to NRA withholding, treat the
payment as made to a foreign person, irrespec-
tive of any agreement to treat the branch as a
U.S. person for amounts subject to NRA with-
holding. Consequently, amounts not subject to
NRA withholding that are paid to a U.S. branch
are not subject to Form 1099 reporting or
backup withholding.
Alternatively, a U.S. branch may provide you
with a Form W-8IMY with which it associates the
documentation of the persons on whose behalf it
acts. In this situation, the payees are the per-
sons on whose behalf the branch acts provided
you can reliably associate the payment with
valid documentation from those persons. See
Nonqualified Intermediaries under Documenta-
tion, later.
If the U.S. branch does not provide you with
a Form W-8IMY, then you should treat a pay-
ment subject to NRA withholding as made to the
foreign person of which the branch is a part and
the income as effectively connected with the
conduct of a trade or business in the United
States.
Withholding foreign partnership and foreign
trust. A withholding foreign partnership (WP)
is any foreign partnership that has entered into a
WP withholding agreement with the IRS and is
acting in that capacity. A withholding foreign
trust (WT) is a foreign simple or grantor trust that
has entered into a WT withholding agreement
with the IRS and is acting in that capacity.
A WP or WT may act in that capacity only for
payments of amounts subject to NRA withhold-
ing that are distributed to, or included in the
distributive share of, its direct partners, benefi-
ciaries, or owners. A WP or WT acting in that
capacity must assume NRA withholding respon-
sibility for these amounts. You may treat a WP or
WT as a payee if it has provided you with docu-
mentation (discussed later) that represents that
it is acting as a WP or WT for such amounts.
WP and WT withholding agreements. The
WP and WT withholding agreements and the
application procedures for the agreements are
in Revenue Procedure 2003-64 found on page
306 of I.R.B. 2003-32 at www.irs.gov/pubs/
irs-irbs/irb03 – 32. Also see the following items.
• Revenue Procedure 2004-21 (I.R.B.
2004-14).
• Revenue Procedure 2005-77 (I.R.B.
2005-51).
Employer identification number (EIN). A
completed Form SS-4 must be submitted with
the application for being a WP or WT. The WP or
WT will be assigned a WP-EIN or WT-EIN to be
used only when acting in that capacity.
Documentation. A WP or WT must provide
you with a Form W-8IMY that certifies that the
WP or WT is acting in that capacity and a written
statement identifying the amounts for which it is
11:14 - 23-APR-2008
so acting. The statement is not required to con-
tain withholding rate pool information or any
information relating to the identity of a direct
partner, beneficiary, or owner. The Form
W-8IMY must contain the WP-EIN or WT-EIN.
Foreign Persons
A payee is subject to NRA withholding only if it is
a foreign person. A foreign person includes a
nonresident alien individual, foreign corporation,
foreign partnership, foreign trust, a foreign es-
tate, and any other person that is not a U.S.
person. It also includes a foreign branch of a
U.S. financial institution if the foreign branch is a
qualified intermediary. Generally, the U.S.
branch of a foreign corporation or partnership is
treated as a foreign person.
Nonresident alien. A nonresident alien is an
individual who is not a U.S. citizen or a resident
alien. A resident of a foreign country under the
residence article of an income tax treaty is a
nonresident alien individual for purposes of with-
holding.
Married to U.S. citizen or resident alien.
Nonresident alien individuals married to U.S.
citizens or resident aliens may choose to be
treated as resident aliens for certain income tax
purposes. However, these individuals are still
subject to the NRA withholding rules that apply
to nonresident aliens for all income except
wages. Wages paid to these individuals are sub-
ject to the withholding rules that apply to U.S.
citizens and resident aliens and not the NRA
withholding rules. See Publication 15 (Circular
E).
Resident alien. A resident alien is an individ-
ual that is not a citizen or national of the United
States and who meets either the green card test
or the substantial presence test for the calendar
year.
• Green card test. An alien is a U.S. resi-
dent if the individual was a lawful perma-
nent resident of the United States at any
time during the calendar year. This is
known as the green card test because
these aliens hold immigrant visas (also
known as green cards).
• Substantial presence test. An alien is
considered a U.S. resident if the individual
meets the substantial presence test for the
calendar year. Under this test, the individ-
ual must be physically present in the
United States on at least:
1. 31 days during the current calendar year,
and
2. 183 days during the current year and the 2
preceding years, counting all the days of
physical presence in the current year, but
only 1/3 the number of days of presence in
the first preceding year, and only 1/6 the
number of days in the second preceding
year.
Generally, the days the alien is in the United
States as a teacher, student, or trainee on an
“F,” “J,” “M,” or “Q” visa are not counted. This
exception is for a limited period of time.
Publication 515 (April 2008)
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For more information on resident and non-
resident status, the tests for residence, and the
exceptions to them, see Publication 519.
Note. If your employee is late in notifying
you that his or her status changed from nonresi-
dent alien to resident alien, you may have to
make an adjustment to Form 941 if that em-
ployee was exempt from withholding of social
security and Medicare taxes as a nonresident
alien. For more information on making adjust-
ments, see Section 13 of Publication 15 (Circu-
lar E).
Resident of a U.S. possession. A bona
fide resident of Puerto Rico, the U.S. Virgin
Islands, Guam, the Commonwealth of the North-
ern Mariana Islands (CNMI), or American Sa-
moa who is not a U.S. citizen or a U.S. national
is treated as a nonresident alien for the withhold-
ing rules explained here. A bona fide resident of
a possession is someone who:
• Meets the presence test,
• Does not have a tax home outside the
possession, and
• Does not have a closer connection to the
United States or to a foreign country than
to the possession.
For more information, see Publication 570,
Tax Guide for Individuals With Income From
U.S. Possessions.
Foreign corporations. A foreign corporation
is one that does not fit the definition of a domes-
tic corporation. A domestic corporation is one
that was created or organized in the United
States or under the laws of the United States,
any of its states, or the District of Columbia.
Guam or Northern Mariana Islands corpo-
rations. A corporation created or organized in,
or under the laws of, Guam or the CNMI is not
considered a foreign corporation for the purpose
of withholding tax for the tax year if:
• At all times during the tax year less than
25% in value of the corporation’s stock is
owned, directly or indirectly, by foreign
persons, and
• At least 20% of the corporation’s gross
income is derived from sources within
Guam or the CNMI for the 3-year period
ending with the close of the preceding tax
year of the corporation (or the period the
corporation has been in existence, if less).
Note. The provisions discussed under U.S.
Virgin Islands and American Samoa corpora-
tions will apply to Guam or CNMI corporations
when an implementing agreement is in effect
between the United States and that possession.
U.S. Virgin Islands and American Samoa
corporations. A corporation created or organ-
ized in, or under the laws of, the U.S. Virgin
Islands or American Samoa is not considered a
foreign corporation for the purposes of withhold-
ing tax for the tax year if:
• At all times during the tax year less than
25% in value of the corporation’s stock is
owned, directly or indirectly, by foreign
persons,
• At least 65% of the corporation’s gross
income is effectively connected with the
Publication 515 (April 2008)
conduct of a trade or business in the U.S.
Virgin Islands, American Samoa, Guam,
the CNMI, or the United States for the
3-year period ending with the close of the
tax year of the corporation (or the period
the corporation or any predecessor has
been in existence, if less), and
• No substantial part of the income of the
corporation is used, directly or indirectly,
to satisfy obligations to a person who is
not a bona fide resident of the U.S. Virgin
Islands, American Samoa, Guam, the
CNMI, or the United States.
Foreign private foundations. A private foun-
dation that was created or organized under the
laws of a foreign country is a foreign private
foundation. Gross investment income from
sources within the United States paid to a quali-
fied foreign private foundation is subject to NRA
withholding at a 4% rate (unless exempted by a
treaty) rather than the ordinary statutory 30%
rate.
Other foreign organizations, associations,
and charitable institutions. An organization
may be exempt from income tax under section
501(a) of the Internal Revenue Code even if it
was formed under foreign law. Generally, you do
not have to withhold tax on payments of income
to these foreign tax-exempt organizations un-
less the IRS has determined that they are for-
eign private foundations.
Payments to these organizations, however,
must be reported on Form 1042-S, even though
no tax is withheld.
You must withhold tax on the unrelated busi-
ness income (as described in Publication 598,
Tax on Unrelated Business Income of Exempt
Organizations) of foreign tax-exempt organiza-
tions in the same way that you would withhold
tax on similar income of nonexempt organiza-
tions.
U.S. branches of foreign persons. In gen-
eral, a payment to a U.S. branch of a foreign
person is a payment made to the foreign person.
You may, however, treat payments to U.S.
branches of foreign banks and foreign insurance
companies (discussed earlier) that are subject
to U.S. regulatory supervision as payments
made to a U.S. person, if you and the U.S.
branch have agreed to do so, and if their agree-
ment is evidenced by a withholding certificate,
Form W-8IMY. For this purpose, a financial insti-
tution organized under the laws of a U.S. pos-
session is treated as a U.S. branch.
Documentation
Generally, you must withhold 30% from the
gross amount paid to a foreign payee unless you
can reliably associate the payment with valid
documentation that establishes either of the fol-
lowing.
• The payee is a U.S. person.
• The payee is a foreign person that is the
beneficial owner of the income and is enti-
tled to a reduced rate of withholding.
11:14 - 23-APR-2008
Generally, you must get the documentation
before you make the payment. The documenta-
tion is not valid if you know, or have reason to
know, that it is unreliable or incorrect. See Stan-
dards of Knowledge, later.
If you cannot reliably associate a payment
with valid documentation, you must use the pre-
sumption rules discussed later. For example, if
you do not have documentation or you cannot
determine the portion of a payment that is allo-
cable to specific documentation, you must use
the presumption rules.
The specific types of documentation are dis-
cussed in this section. You should, however,
also see the discussion, Withholding on Specific
Income, as well as the instructions to the particu-
lar forms. As the withholding agent, you may
also want to see the Instructions for the Re-
quester of Forms W-8BEN, W-8ECI, W-8EXP,
and W-8IMY.
Section 1446 withholding. Under section
1446 of the Code, a partnership must withhold
tax on its effectively connected income allocable
to a foreign partner. Generally, a partnership
determines if a partner is a foreign partner and
the partner’s tax classification based on the
withholding certificate provided by the partner.
This is the same documentation that is filed for
NRA withholding, but may require additional in-
formation as discussed under each of the forms
in this section.
Joint owners. If you make a payment to joint
owners, you need to get documentation from
each owner.
Form W-9. Generally, you can treat the payee
as a U.S. person if the payee gives you a Form
W-9. The Form W-9 can only be used by a U.S.
person and must contain the payee’s taxpayer
identification number (TIN). If there is more than
one owner, you may treat the total amount as
paid to a U.S. person if any one of the owners
gives you a Form W-9. See U.S. Taxpayer Iden-
tification Numbers, later. U.S. persons are not
subject to NRA withholding, but may be subject
to Form 1099 reporting and backup withholding.
Form W-8. Generally, a foreign person that is
a beneficial owner of the income should give you
a Form W-8. Until further notice, you can rely
upon Forms W-8 that contain a P.O. box as a
permanent residence address provided you do
not know, or have reason to know, that the
person providing the form is a U.S. person and
that a street address is available. You may rely
on Forms W-8 for which there is a U.S. mailing
address provided you received the form prior to
December 31, 2001.
If certain requirements are met, the foreign
person can give you documentary evidence,
rather than a Form W-8. You can rely on docu-
mentary evidence in lieu of a Form W-8 for a
payment made in a U.S. possession.
Other documentation. Other documentation
may be required to claim an exemption from, or
a reduced rate of, withholding on pay for per-
sonal services. The nonresident alien individual
may have to give you a Form W-4 or a Form
8233, Exemption From Withholding on Com-
pensation for Independent (and Certain Depen-
dent) Personal Services of a Nonresident Alien
Individual. These forms are discussed in Pay for
Personal Services Performed under Withhold-
ing on Specific Income.
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Beneficial Owners
If all the appropriate requirements have been
established on a Form W-8BEN, W-8ECI,
W-8EXP or, if applicable, on documentary evi-
dence, you may treat the payee as a foreign
beneficial owner.
Form W-8BEN, Certificate of Foreign Status
of Beneficial Owner for United States Tax
Withholding. This form is used by a foreign
person to:
• Establish foreign status,
• Claim that such person is the beneficial
owner of the income for which the form is
being furnished or a partner in a partner-
ship subject to section 1446 withholding,
and
• If applicable, claim a reduced rate of, or
exemption from, withholding under an in-
come tax treaty.
Form W-8BEN may also be used to claim that
the foreign person is exempt from Form 1099
reporting and backup withholding for income
that is not subject to NRA withholding. For ex-
ample, a foreign person may provide a Form
W-8BEN to a broker to establish that the gross
proceeds from the sale of securities are not
subject to Form 1099 reporting or backup with-
holding.
Claiming treaty benefits. You may apply a
reduced rate of withholding to a foreign person
that provides a Form W-8BEN claiming a re-
duced rate of withholding under an income tax
treaty only if the person provides a U.S. TIN and
certifies that:
• It is a resident of a treaty country,
• It is the beneficial owner of the income,
• If it is an entity, it derives the income
within the meaning of section 894 of the
Internal Revenue Code (it is not fiscally
transparent), and
• It meets any limitation on benefits provi-
sion contained in the treaty, if applicable.
If the foreign beneficial owner claiming a
treaty benefit is related to you, the foreign bene-
ficial owner must also certify on Form W-8BEN
that it will file Form 8833, Treaty-Based Return
Position Disclosure Under Section 6114 or
7701(b), if the amount subject to NRA withhold-
ing received during a calendar year exceeds, in
the aggregate, $500,000.
An entity derives income for which it is claim-
ing treaty benefits only if the entity is not treated
as fiscally transparent for that income. See Fis-
cally transparent entity discussed earlier under
Flow-Through Entities.
Limitations on benefits provisions generally
prohibit third country residents from obtaining
treaty benefits. For example, a foreign corpora-
tion may not be entitled to a reduced rate of
withholding unless a minimum percentage of its
owners are citizens or residents of the United
States or the treaty country.
The exemptions from, or reduced rates of,
U.S. tax vary under each treaty. You must check
the provisions of the tax treaty that apply. Tables
at the end of this publication show the countries
with which the United States has income tax
Page 8
treaties and the rates of withholding that apply in
cases where all conditions of the particular
treaty articles are satisfied.
If you know, or have reason to know, that an
owner of income is not eligible for treaty benefits
claimed, you must not apply the treaty rate. You
are not, however, responsible for misstatements
on a Form W-8, documentary evidence, or state-
ments accompanying documentary evidence for
which you did not have actual knowledge, or
reason to know that the statements were incor-
rect.
Exceptions to TIN requirement. A foreign
person does not have to provide a TIN to claim a
reduced rate of withholding under a treaty if the
requirements for the following exceptions are
met.
• Income from marketable securities (dis-
cussed next).
• Unexpected payments to an individual
(discussed under U.S. Taxpayer Identifica-
tion Numbers).
Marketable securities. A Form W-8BEN
provided to claim treaty benefits does not need a
U.S. TIN if the foreign beneficial owner is claim-
ing the benefits on income from marketable se-
curities. For this purpose, income from a
marketable security consists of the following
items.
• Dividends and interest from stocks and
debt obligations that are actively traded.
• Dividends from any redeemable security
issued by an investment company regis-
tered under the Investment Company Act
of 1940 (mutual fund).
• Dividends, interest, or royalties from units
of beneficial interest in a unit investment
trust that are (or were upon issuance) pub-
licly offered and are registered with the
SEC under the Securities Act of 1933.
• Income related to loans of any of the
above securities.
Offshore accounts. If a payment is made
outside the United States to an offshore ac-
count, a payee may give you documentary evi-
dence, rather than Form W-8BEN.
Generally, a payment is made outside the
United States if you complete the acts neces-
sary to effect the payment outside the United
States. However, an amount paid by a bank or
other financial institution on a deposit or account
will usually be treated as paid at the branch or
office where the amount is credited. An offshore
account is an account maintained at an office or
branch of a U.S. or foreign bank or other finan-
cial institution at any location outside the United
States.
You may rely on documentary evidence
given you by a nonqualified intermediary or a
flow-through entity with its Form W-8IMY. This
rule applies even though you make the payment
to a nonqualified intermediary or flow-through
entity in the United States. Generally, the non-
qualified intermediary or flow-through entity that
gives you documentary evidence will also have
to give you a withholding statement, discussed
later.
11:14 - 23-APR-2008
Documentary evidence. You may apply a
reduced rate of withholding to income from mar-
ketable securities (discussed earlier) paid
outside the United States to an offshore account
if the beneficial owner gives you documentary
evidence in place of a Form W-8BEN. To claim
treaty benefits, the documentary evidence must
be one of the following:
1. A certificate of residence that:
a. Is issued by a tax official of the treaty
country of which the foreign beneficial
owner claims to be a resident,
b. States that the person has filed its most
recent income tax return as a resident
of that country, and
c. Is issued within 3 years prior to being
presented to you.
2. Documentation for an individual that:
a. Includes the individual’s name, address,
and photograph,
b. Is an official document issued by an au-
thorized governmental body, and
c. Is issued no more than 3 years prior to
being presented to you.
3. Documentation for an entity that:
a. Includes the name of the entity,
b. Includes the address of its principal of-
fice in the treaty country, and
c. Is an official document issued by an au-
thorized governmental body.
In addition to the documentary evidence, a for-
eign beneficial owner that is an entity must
provide a statement that it derives the income
for which it claims treaty benefits and that it
meets one or more of the conditions set forth in
a limitation on benefits article, if any, (or similar
provision) contained in the applicable treaty.
Form W-8ECI, Certificate of Foreign Per-
son’s Claim That Income Is Effectively Con-
nected With the Conduct of a Trade or
Business in the United States. This form is
used by a foreign person to:
• Establish foreign status,
• Claim that such person is the beneficial
owner of the income for which the form is
being furnished, and
• Claim that the income is effectively con-
nected with the conduct of a trade or busi-
ness in the United States. (See Effectively
Connected Income, later.)
Effectively connected income for which a valid
Form W-8ECI has been provided is generally
not subject to NRA withholding.
If a partner submits this form to a partner-
ship, the income claimed to be effectively con-
nected with the conduct of a U.S. trade or
business is subject to withholding under section
1446. If the partner has made, or will make, an
election under section 871(d) or 882(d), the part-
ner must submit Form W-8ECI, and attach a
copy of the election, or a statement of intent to
elect, to the form.
Publication 515 (April 2008)
Page 9 of 58 of Publication 515
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If the partner’s only effectively con-
! nected income is the income allocated
CAUTION
from the partnership and the partner is
not making the election under section 871(d) or
882(d), the partner should provide Form
W-8BEN to the partnership.
Form W-8EXP, Certificate of Foreign Govern-
ment or Other Foreign Organization for
United States Tax Withholding. This form is
used by a foreign government, international or-
ganization, foreign central bank of issue, foreign
tax-exempt organization, foreign private founda-
tion, or government of a U.S. possession to:
• Establish foreign status,
• Claim that such person is the beneficial
owner of the income for which the form is
being furnished, and
• Claim a reduced rate of, or an exemption
from, withholding as such an entity.
If the government or organization is a partner
in a partnership carrying on a trade or business
in the United States, the effectively connected
income allocable to the partner is subject to
withholding under section 1446.
See Foreign Governments and Certain
Other Foreign Organizations, later.
Foreign Intermediaries
and Foreign
Flow-Through Entities
Payments made to a foreign intermediary or
foreign flow-through entity are treated as made
to the payees on whose behalf the intermediary
or entity acts. The Form W-8IMY provided by a
foreign intermediary or flow-through entity must
be accompanied by additional information for
you to be able to reliably associate the payment
with a payee. The additional information re-
quired depends on the type of intermediary or
flow-through entity and the extent of the with-
holding responsibilities it assumes.
Form W-8IMY, Certificate of Foreign Interme-
diary, Foreign Flow-Through Entity, or Cer-
tain U.S. Branches for United States Tax
Withholding. This form is used by foreign in-
termediaries and foreign flow-through entities,
as well as certain U.S. branches, to:
• Represent that a foreign person is a quali-
fied intermediary or nonqualified interme-
diary,
• Represent, if applicable, that the qualified
intermediary is assuming primary NRA
withholding responsibility and/or primary
Form 1099 reporting and backup withhold-
ing responsibility,
• Represent that a foreign partnership or a
foreign simple or grantor trust is a with-
holding foreign partnership or a withhold-
ing foreign trust,
• Represent that a foreign flow-through en-
tity is a nonwithholding foreign partner-
ship, or a nonwithholding foreign trust and
that the income is not effectively con-
nected with the conduct of a trade or busi-
ness in the United States,
• Represent that the provider is a U.S.
branch of a foreign bank or insurance
Publication 515 (April 2008)
company and either is agreeing to be
treated as a U.S. person, or is transmitting
documentation of the persons on whose
behalf it is acting, or
• Represent that, for purposes of section
1446, it is an upper-tier foreign partnership
or a foreign grantor trust and that the form
is being used to transmit the required doc-
umentation. For information on qualifying
as an upper-tier foreign partnership, see
Regulations section 1.1446-5.
Qualified Intermediaries
Generally, a QI is any foreign intermediary that
has entered into a QI withholding agreement
(discussed earlier) with the IRS. A foreign inter-
mediary that has received a QI employer identifi-
cation number (QI-EIN) may represent on Form
W-8IMY that it is a QI before it receives a fully
executed agreement. The intermediary can
claim that it is a QI until the IRS revokes its
QI-EIN. The IRS will revoke a QI-EIN if the QI
agreement is not executed and returned to the
IRS within a reasonable period of time after the
agreement was sent to the intermediary for sig-
nature.
Responsibilities. Payments made to a QI
that does not assume NRA withholding respon-
sibility are treated as paid to its account holders
and customers. However, a QI is not required to
provide you with documentation it obtains from
its foreign account holders and customers. In-
stead, it provides you with a withholding state-
ment that contains withholding rate pool
information. A withholding rate pool is a pay-
ment of a single type of income, determined in
accordance with the categories of income re-
ported on Form 1042-S that is subject to a single
rate of withholding. A qualified intermediary is
required to provide you with information regard-
ing U.S. persons subject to Form 1099 reporting
and to provide you withholding rate pool infor-
mation separately for each such U.S. person
unless it has assumed Form 1099 reporting and
backup withholding responsibility. For the alter-
native procedure for providing rate pool informa-
tion for U.S. non-exempt persons, see the Form
W-8IMY instructions.
The withholding statement must:
1. Designate those accounts for which it acts
as a qualified intermediary,
2. Designate those accounts for which it as-
sumes primary NRA withholding responsi-
bility and/or primary Form 1099 and
backup withholding responsibility, and
3. Provide sufficient information for you to al-
locate the payment to a withholding rate
pool.
The extent to which you must have withhold-
ing rate pool information depends on the with-
holding and reporting obligations assumed by
the QI.
Primary responsibility not assumed. If a
QI does not assume primary NRA withholding
responsibility or primary Form 1099 reporting
and backup withholding responsibility for the
payment, you can reliably associate the pay-
ment with valid documentation only to the extent
you can reliably determine the portion of the
payment that relates to each withholding rate
11:14 - 23-APR-2008
pool for foreign payees. Unless the alternative
procedure applies, the qualified intermediary
must provide you with a separate withholding
rate pool for each U.S. person subject to Form
1099 reporting and/or backup withholding. The
QI must provide a Form W-9 or, in the absence
of the form, the name, address, and TIN, if
available, for such person.
Primary NRA withholding responsibility
assumed. If you make a payment to a QI that
assumes primary NRA withholding responsibil-
ity (but not primary Form 1099 reporting and
backup withholding responsibility), you can reli-
ably associate the payment with valid documen-
tation only to the extent you can reliably
determine the portion of the payment that re-
lates to the withholding rate pool for which the QI
assumes primary NRA withholding responsibil-
ity and the portion of the payment attributable to
withholding rate pools for each U.S. person,
unless the alternative procedure applies, sub-
ject to Form 1099 reporting and/or backup with-
holding. The QI must provide a Form W-9 or, in
absence of the form, the name, address, and
TIN, if available, for such person.
Primary NRA and Form 1099 responsibility
assumed. If you make a payment to a QI that
assumes both primary NRA withholding respon-
sibility and primary Form 1099 reporting and
backup withholding responsibility, you can relia-
bly associate a payment with valid documenta-
tion provided that you receive a valid Form
W-8IMY. It is not necessary to associate the
payment with withholding rate pools.
Example. You make a payment of divi-
dends to a QI. It has five customers: two are
foreign persons who have provided documenta-
tion entitling them to a 15% rate of withholding
on dividends; two are foreign persons subject to
a 30% rate of withholding on dividends; and one
is a U.S. individual who provides it with a Form
W-9. Each customer is entitled to 20% of the
dividend payment. The QI does not assume any
primary withholding responsibility. The QI gives
you a Form W-8IMY with which it associates the
Form W-9 and a withholding statement that allo-
cates 40% of the dividend to a 15% withholding
rate pool, 40% to a 30% withholding rate pool,
and 20% to the U.S. individual. You should re-
port on Forms 1042-S 40% of the payment as
made to a 15% rate dividend pool and 40% of
the payment as made to a 30% rate dividend
pool. The portion of the payment allocable to the
U.S. individual (20%) is reportable on Form
1099-DIV.
Smaller partnerships and trusts. A QI may
apply special rules to a smaller partnership or
trust (Joint Account Provision) only if the part-
nership or trust meets the following conditions.
• It is a foreign partnership or foreign simple
or grantor trust.
• It is a direct account holder of the QI.
• It does not have any partner, beneficiary,
or owner that is a U.S. person or a pass-
through partner, beneficiary, or owner.
For information on these rules, see section
4A.01 of the QI agreement. This is found in
Appendix 3 of Revenue Procedure 2003-64
(I.R.B. 2003-32). Also see Revenue Procedure
2004-21(I.R.B. 2004-14).
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Related partnerships and trusts. A QI may
apply special rules to a related partnership or
trust only if the partnership or trust meets the
following conditions.
1. It is a foreign partnership or foreign simple
or grantor trust.
2. It is either:
a. A direct account holder of the QI, or
b. An indirect account holder of the QI that
is a direct partner, beneficiary, or owner
of a partnership or trust to which the QI
has applied this rule.
For information on these rules, see section
4A.02 of the QI agreement. This is found in
Appendix 3 of Revenue Procedure 2003-64
(I.R.B. 2003-32). Also see Revenue Procedure
2005-77 (I.R.B. 2005-51).
Nonqualified Intermediaries
If you are making a payment to a nonqualified
intermediary, foreign flow-through entity, or U.S.
branch that is using Form W-8IMY to transmit
information about the branch’s account holders
or customers, you can treat the payment (or a
portion of the payment) as reliably associated
with valid documentation from a specific payee
only if, prior to making the payment:
• You can allocate the payment to a valid
Form W-8IMY,
• You can reliably determine how much of
the payment relates to valid documenta-
tion provided by a payee (a person that is
not itself a foreign intermediary,
flow-through entity, or a U.S. branch), and
• You have sufficient information to report
the payment on Form 1042-S or Form
1099, if reporting is required.
The NQI, flow-through entity, or U.S. branch
must give you certain information on a withhold-
ing statement that is associated with the Form
W-8IMY. A withholding statement must be up-
dated to keep the information accurate prior to
each payment.
Withholding statement. Generally, a with-
holding statement must contain the following
information.
1. The name, address, and TIN (if any, or if
required) of each person for whom docu-
mentation is provided.
2. The type of documentation (documentary
evidence, Form W-8, or Form W-9) for
every person for whom documentation has
been provided.
3. The status of the person for whom the doc-
umentation has been provided, such as
whether the person is a U.S. exempt recip-
ient (U.S. person exempt from Form 1099
reporting), U.S. non-exempt recipient (U.S.
person subject to Form 1099 reporting), or
a foreign person. For a foreign person, the
statement must indicate whether the per-
son is a beneficial owner or a foreign inter-
mediary, flow-through entity, or a U.S.
branch.
Page 10
4. The type of recipient the person is, based
on the recipient codes used on Form
1042-S.
5. Information allocating each payment, by in-
come type, to each payee (including U.S.
exempt and U.S. non-exempt recipients)
for whom documentation has been pro-
vided.
6. The rate of withholding that applies to each
foreign person to whom a payment is allo-
cated.
7. A foreign payee’s country of residence.
8. If a reduced rate of withholding is claimed,
the basis for a reduced rate of withholding
(for example, portfolio interest, treaty ben-
efit, etc.).
9. In the case of treaty benefits claimed by
entities, whether the applicable limitation
on benefits statement and the statement
that the foreign person derives the income
for which treaty benefits are claimed, have
been made.
10. The name, address, and TIN (if any) of any
other NQI, flow-through entity, or U.S.
branch from which the payee will directly
receive a payment.
11. Any other information a withholding agent
requests to fulfill its reporting and withhold-
ing obligations.
Alternative procedure. Under this alternative
procedure the NQI can give you the information
that allocates each payment to each foreign and
U.S. exempt recipient by January 31 following
the calendar year of payment, rather than prior
to the payment being made as otherwise re-
quired. To take advantage of this procedure, the
NQI must: (a) inform you, on its withholding
statement, that it is using the alternative proce-
dure; and (b) obtain your consent. You must
receive the withholding statement with all the
required information (other than item 5) prior to
making the payment.
This alternative procedure cannot be
! used for payments to U.S. non-exempt
CAUTION
recipients. Therefore, an NQI must al-
ways provide you with allocation information for
all U.S. non-exempt recipients prior to a pay-
ment being made.
Pooled withholding information. If an NQI
uses the alternative procedure, it must provide
you with withholding rate pool information, as
opposed to individual allocation information,
prior to the payment of a reportable amount. A
withholding rate pool is a payment of a single
type of income (as determined by the income
categories on Form 1042-S) that is subject to a
single rate of withholding. For example, an NQI
that has foreign account holders receiving royal-
ties and dividends, both subject to the 15% rate,
will provide you with information for two with-
holding rate pools (one for royalties and one for
dividends). The NQI must provide you with the
payee specific allocation information (informa-
tion allocating each payment to each payee) by
January 31 following the calendar year of pay-
ment.
Failure to provide allocation information.
If an NQI fails to provide you with the payee
11:14 - 23-APR-2008
specific allocation information for a withholding
rate pool by January 31, you must not apply the
alternative procedure to any of the NQI’s with-
holding rate pools from that date forward. Un-
less the NQI provides all the required
information, including account holder specific
allocation information, prior to any payments
being made, you must treat the payees as un-
documented and apply the presumption rules,
discussed later. An NQI is deemed to have failed
to provide specific allocation information if it
does not give you such information for more
than 10% of any one withholding rate pool.
However, if you receive such information by
February 14, you may make the appropriate
adjustments to repay any excess withholding
incurred between February 1 and on or before
February 14.
If the NQI fails to allocate more than 10% of
the payment to a withholding rate pool by Febru-
ary 14 following the calendar year of payment,
you must file a Form 1042-S for each account
holder in the pool on a pro-rata basis. For exam-
ple, if there are four account holders in a with-
holding rate pool that receives a $100 payment
and the NQI fails to allocate more than $10 of
the payment, you must file four Forms 1042-S,
one for each account holder in the pool, showing
$25 of income to each. You must also check the
“Pro-rata Basis Reporting” box at the top of each
form. If, however, the nonqualified intermediary
provides allocation information for 90% or more
of the payment to a withholding rate pool, the
pro-rata reporting method is not required. In-
stead, you must file a Form 1042-S for each
account holder for whom you have allocation
information and report the unallocated portion of
the payment on a Form 1042-S issued to “un-
known recipient.”
Withholding Foreign Partnerships
If you are making payments to a WP, you do not
have to withhold if the WP is acting in that
capacity. The WP must assume NRA withhold-
ing responsibility for amounts (subject to NRA
withholding) that are distributed to, or included in
the distributive share of, any direct partner. The
WP must withhold the amount required to be
withheld. A WP must provide you with a Form
W-8IMY that certifies that the WP is acting in
that capacity and a written statement identifying
the amounts for which it is so acting. The Form
W-8IMY must contain the WP-EIN.
Responsibilities of WP. The WP must with-
hold on the date it makes a distribution of an
amount subject to NRA withholding to a direct
foreign partner based on the Forms W-8 or W-9
it receives from its partners. If the partner’s dis-
tributive share has not been distributed, the WP
must withhold on the partner’s distributive share
on the earlier of the date that the partnership
must mail or otherwise provide to the partner a
Schedule K-1 (Form 1065) or the due date for
furnishing the statement (whether or not the WP
is required to furnish the statement).
The WP may determine the amount of with-
holding based on a reasonable estimate of the
partner’s distributive share of income subject to
withholding for the year. The WP must correct
the estimated withholding to reflect the actual
distributive share on the earlier of the dates
mentioned in the preceding paragraph. If that
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date is after the due date for filing the WP’s
Forms 1042 and 1042-S (including extensions
for the calendar year), the WP may withhold and
report any adjustments in the following calendar
year.
Form 1042 filing. The WP must file Form
1042 even if no amount was withheld. In addition
to the information that is required for the Form
1042, the WP must attach a statement showing
the amounts of any over- or under-withholding
adjustments and an explanation of those adjust-
ments.
Form 1042-S reporting. The WP can elect
to report payments made to its direct partners on
a pooled basis rather than reporting payments to
each direct partner. This election must be made
when the WP withholding agreement is exe-
cuted. If the election was not made, the WP
must file separate Forms 1042-S for each direct
partner whose distributive share included an
amount subject to NRA withholding.
Smaller partnerships and trusts. Under a
special rule, a WP that has made a pooled
reporting election can treat partners of certain
smaller partnerships and beneficiaries or own-
ers of certain smaller trusts (Joint Account Provi-
sion) as direct partners. These rules only apply
to a partnership or trust that meets the following
conditions.
• It is a foreign partnership or foreign simple
or grantor trust.
• It is a direct partner of the WP.
• It does not have any partner, beneficiary,
or owner that is a U.S. person or a pass-
through partner, beneficiary, or owner.
For more information on applying these rules,
see section 10.01 of the WP agreement found in
Revenue Procedure 2003-64 (I.R.B. 2003-32).
Also see Revenue Procedure 2004-21 (I.R.B.
2004-14).
Related partnerships and trusts. Under a
special rule, a WP that has made a pooled
reporting election can treat direct partners of
certain related partnerships and direct benefi-
ciaries or owners of certain related trusts as
direct partners. These rules only apply to a part-
nership or trust that meets the following condi-
tions.
1. It is a foreign partnership or foreign simple
or grantor trust.
2. It is either:
a. A direct partner of the WP, or
b. An indirect partner of the WP that is a
partner, beneficiary, or owner of a part-
nership or trust to which the WP has
applied this rule.
For more information on applying these rules
see section 10.02 of the WP agreement found
in Revenue Procedure 2003-64 (I.R.B.
2003-32). Also see Revenue Procedure
2005-77 (I.R.B. 2005-51).
Not acting as WP. A foreign partnership that
is not acting as a WP is a nonwithholding foreign
partnership. This occurs if a WP is not acting in
that capacity for some or all of the amounts it
receives from you. Also, a WP generally is a
Publication 515 (April 2008)
nonwithholding foreign partnership for amounts
distributed to, or included in the distributive
share of, passthrough partners or indirect part-
ners.
You must treat payments made to a
nonwithholding foreign partnership as made to
the partners of the partnership. The partnership
must provide you with a Form W-8IMY (with Part
VI completed), a withholding statement identify-
ing the amounts, the withholding certificates or
documentary evidence of the partners, and the
information shown earlier under Withholding
statement under Nonqualified Intermediaries.
Withholding Foreign Trusts
If you are making payments to a WT, you do not
have to withhold if the WT is acting in that capac-
ity. The WT must assume NRA withholding re-
sponsibility for amounts (subject to NRA
withholding) that are distributed to, or included in
the distributive share of, any direct beneficiary or
owner. The WT must withhold the amount re-
quired to be withheld. A WT must provide you
with a Form W-8IMY that certifies that the WT is
acting in that capacity and a written statement
identifying the amounts for which it is so acting.
The Form W-8IMY must contain the WT-EIN.
Responsibilities of WT. The WT must with-
hold on the date it makes a distribution of an
amount subject to NRA withholding to a direct
foreign beneficiary or owner. If the beneficiary’s
or owner’s distributive share has not been dis-
tributed, the WT must withhold on the benefi-
ciary’s or owner’s distributive share on the
earlier of the date that the trust must mail or
otherwise provide to the beneficiary or owner a
Schedule K-1 (Form 1041) or the due date for
furnishing the statement (whether or not the WT
is required to furnish the statement).
The WT may determine the amount of with-
holding based on a reasonable estimate of the
beneficiary’s or owner’s distributive share of in-
come subject to withholding for the year. The
WT must correct the estimated withholding to
reflect the actual distributive share on the earlier
of the dates mentioned in the preceding para-
graph. If that date is after the due date for filing
the WT’s Forms 1042 and 1042-S (including
extensions) for the calendar year, the WT may
withhold and report any adjustments in the fol-
lowing calendar year.
Form 1042 filing. The WT must file Form
1042 even if no amount was withheld. In addition
to the information that is required for the Form
1042, the WT must attach a statement showing
the amounts of any over- or under-withholding
adjustments and an explanation of those adjust-
ments.
Form 1042-S reporting. A WT can elect to
report payments made to its direct beneficiaries
or owner on a pooled basis rather than reporting
payments to each direct beneficiary or owner.
This election must be made when the WT with-
holding agreement is executed. If the election
was not made, the WT must file separate Forms
1042-S for each direct beneficiary or owner
whose distributive share included an amount
subject to NRA withholding.
Smaller partnerships and trusts. Under a
special rule, a WT that has made a pooled re-
porting election can treat partners of certain
11:14 - 23-APR-2008
smaller partnerships and beneficiaries or own-
ers of certain smaller trusts (Joint Account Provi-
sion) as direct beneficiaries or owners. These
rules only apply to a partnership or trust that
meets the following conditions.
• It is a foreign partnership or foreign simple
or grantor trust.
• It is a direct partner, beneficiary, or owner
of the WT.
• It does not have any partner, beneficiary,
or owner that is a U.S. person or a pass-
through partner, beneficiary, or owner.
For more information on applying these rules,
see section 10.01 of the WT agreement found in
Revenue Procedure 2003-64 (I.R.B. 2003-32).
Also see Revenue Procedure 2004-21 (I.R.B.
2004-14).
Related partnerships and trusts. Under a
special rule, a WT that has made a pooled re-
porting election can treat direct partners of cer-
tain related partnerships and direct beneficiaries
or owners of certain related trusts as direct ben-
eficiaries or owners. These rules only apply to a
partnership or trust that meets the following con-
ditions.
1. It is a foreign partnership or foreign simple
or grantor trust.
2. It is either:
a. A direct beneficiary or owner of the WT,
or
b. An indirect beneficiary or owner of the
WT that is a partner, beneficiary, or
owner of a partnership or trust to which
the WP has applied this rule.
For more information on applying these rules,
see section 10.02 of the WP agreement found
in Revenue Procedure 2003-64 (I.R.B.
2003-32). Also see Revenue Procedure
2005-77 (I.R.B. 2005-51).
Not acting as WT. A foreign trust that is not
acting as a WT is a nonwithholding foreign trust.
This occurs if a WT is not acting in that capacity
for some or all of the amounts it receives from
you. Also, a WT generally is a nonwithholding
foreign trust for amounts distributed to, or in-
cluded in the distributive share of, passthrough
beneficiaries or owners or indirect beneficiaries
or owners.
Generally, you must treat payments made to
a nonwithholding foreign trust as made to the
beneficiaries of a simple trust or the owners of a
grantor trust. The trust must provide you with a
Form W-8IMY (with Part VI completed), a with-
holding statement identifying the amounts, the
withholding certificates or documentary evi-
dence of the beneficiaries or owners, and the
information shown earlier under Withholding
statement under Nonqualified Intermediaries.
Standards of Knowledge
You must withhold in accordance with the pre-
sumption rules (discussed later) if you know or
have reason to know that a Form W-8 or docu-
mentary evidence provided by a payee is unreli-
able or incorrect. If you rely on an agent to obtain
documentation, you are considered to know, or
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have reason to know, the facts that are within
the knowledge of your agent.
Reason To Know
Generally, you are considered to have reason to
know that a claim of U.S. status or of a reduced
rate of withholding is incorrect if statements con-
tained in the withholding certificate or other doc-
umentation, or other relevant facts of which you
have knowledge, would cause a reasonably pru-
dent person in your position to question the
claims made.
Financial institutions (including a regulated
investment company) are treated as having rea-
son to know documentation is unreliable or in-
correct for payments on marketable securities
only in the circumstances discussed next. If the
documentation is considered unreliable or incor-
rect, you must get new documentation. How-
ever, you may rely on the original docu-
mentation if you receive the additional state-
ments and/or documentation discussed.
The circumstances, discussed next, also ap-
ply to a withholding agent that is not a financial
institution or making a payment on marketable
securities. However, these withholding agents
are not limited to these circumstances in deter-
mining if they have reason to know that docu-
mentation is unreliable or incorrect. These
withholding agents cannot base their determina-
tion on the receipt of additional statements or
documents. They need to get new documenta-
tion.
Withholding Certificates
You have reason to know that a Form W-8
provided by a direct account holder that is a
foreign person is unreliable or incorrect if:
• The Form W-8 is incomplete with respect
to any item on the form that is relevant to
the claims made by the account holder,
• The Form W-8 contains any information
that is inconsistent with the account
holder’s claim,
• The Form W-8 lacks information neces-
sary to establish entitlement to a reduced
rate of withholding, if a reduced rate is
claimed, or
• You have information not contained on the
form that is inconsistent with the claims
made on the form.
Establishment of foreign status. You have
reason to know that a Form W-8BEN or Form
W-8EXP is unreliable or incorrect to establish a
direct account holder’s status as a foreign per-
son if:
1. The Form W-8 has a permanent residence
address in the United States,
2. The Form W-8 has a mailing address in
the United States,
3. You have a residence or mailing address
as part of your account information that is
an address in the United States,
4. The person providing the certificate notifies
you of a new residence or mailing address
in the United States, or
Page 12
5. If the Form W-8 is provided with respect to
an offshore account, the account holder
has standing instructions directing you to
pay amounts from its account to an ad-
dress or account maintained in the United
States.
Note. Items (2) and (3) do not apply if the
U.S. mailing address is provided on a Form W-8
received before December 31, 2001.
You may, however, rely on a Form W-8 as
establishing the account holder’s foreign status
if any of the following apply:
1. You receive the Form W-8 from an individ-
ual and:
a. You possess or obtain documentary ev-
idence (that does not contain a U.S.
address) that was provided within the
last three years, was valid when pro-
vided, supports the claim of foreign sta-
tus, and the beneficial owner provides
you with a reasonable explanation in
writing supporting the account holder’s
foreign status, or
b. If the account is maintained at your of-
fice outside the United States, you are
required to report annually a payment to
the account holder on a tax information
statement filed with the tax authority of
the country in which your office is lo-
cated and that country has an income
tax treaty in effect with the United
States.
2. You receive the Form W-8 from an entity
that is not a flow-through entity and:
a. You have in your possession or obtain
documentation that substantiates that
the entity is organized or created under
foreign law, or
b. If the account is maintained at your of-
fice outside the United States, you are
required to report annually a payment to
the account holder on a tax information
statement filed with the tax authority of
the country in which your office is lo-
cated and that country has an income
tax treaty in effect with the United
States.
3. The account holder has provided standing
instructions to make payments with re-
spect to its offshore account to a U.S. ac-
count or U.S. address if the account holder
provides a reasonable explanation in writ-
ing that supports the account holder’s for-
eign status.
Claim of reduced rate of withholding under
treaty. You have reason to know that a Form
W-8BEN provided by a direct account holder to
claim a reduced rate of withholding under a
treaty is unreliable or incorrect for purposes of
establishing the account holder’s residency in a
treaty country if:
• The permanent residence address on the
Form W-8BEN is not in the treaty country
or the beneficial owner notifies you of a
new permanent residence address that is
not in the treaty country,
11:14 - 23-APR-2008
• The permanent residence address on the
Form W-8BEN is in the treaty country but
the withholding certificate (or your account
information) contains a mailing address
that is not in the treaty country, or
• The account holder has standing instruc-
tions for you to pay amounts from its ac-
count to an address or an account not in
the treaty country.
You may, however, rely on a Form W-8BEN
as establishing an account holder’s claim of a
reduced rate of withholding under a treaty if any
of the following apply.
1. The permanent residence address is not in
the treaty country and:
a. The account holder provides a reasona-
ble explanation for the permanent resi-
dence address outside the treaty
country, or
b. You possess or obtain documentary ev-
idence that establishes residency in a
treaty country.
2. The mailing address is not in the treaty
country and:
a. You possess or obtain additional docu-
mentation (that does not contain an ad-
dress outside the treaty country)
supporting the beneficial owner’s claim
of residence in the treaty country,
b. You possess or obtain documentation
that establishes that the beneficial
owner is an entity organized in a treaty
country,
c. You know that the address outside the
treaty country is a branch of a bank or
insurance company that is a resident of
the treaty country, or
d. You obtain a written statement from the
beneficial owner that reasonably estab-
lishes its entitlement to treaty benefits.
3. You have instructions to pay amounts
outside the treaty country and the account
holder gives you a reasonable explanation,
in writing, establishing residence in the ap-
plicable treaty country.
Documentary Evidence
You have reason to know that documentary evi-
dence provided by a direct account holder that is
a foreign person is unreliable or incorrect if:
• The documentary evidence does not rea-
sonably establish the identity of the person
presenting the documentary evidence,
• The documentary evidence contains infor-
mation that is inconsistent with the ac-
count holder’s claim of a reduced rate of
withholding, or
• You have account information that is in-
consistent with the account holder’s claim
of a reduced rate of withholding, or the
documentary evidence lacks information
necessary to establish a reduced rate of
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withholding. For example, the documen-
tary evidence does not contain, or is not
supplemented by, statements regarding
the derivation of the income or compliance
with limitations on benefits provisions in
the case of an entity claiming treaty bene-
fits.
Establishment of foreign status. You have
reason to know that documentary evidence is
unreliable or incorrect to establish a direct ac-
count holder’s status as a foreign person if:
• The only mailing or residence address on
documentary evidence provided after De-
cember 31, 2000, is an address at a finan-
cial institution (unless the financial
institution is the beneficial owner), an
in-care-of address, or a P.O. box,
• You have a mailing or residence address
for the account holder in the United States
or if the account holder notifies you of a
new address in the United States, or
• The account holder has standing instruc-
tions directing you to pay amounts from
the account to an address or account
maintained in the United States.
You may, however, rely on documentary evi-
dence as establishing an account holder’s for-
eign status if any of the following apply.
1. The mailing or residence address is in the
United States, you receive the documen-
tary evidence from an individual, and
a. You possess or obtain additional docu-
mentary evidence (that does not con-
tain a U.S. address) supporting the
claim of foreign status and a reasonable
explanation in writing supporting the ac-
count holder’s foreign status,
b. You possess or obtain a Form W-8 that
contains a permanent residence ad-
dress and mailing address outside the
United States (or if a mailing address is
inside the United States the account
holder provides a reasonable explana-
tion, in writing, supporting the account
holder’s foreign status, or the Form W-8
was received before December 31,
2001), or
c. The account is maintained at your office
outside the United States and you are
required to report annually a payment to
the account holder on a tax information
statement filed with the tax authority of
Chart A. Presumption Rules in the Absence of Documentation
For the presumption rules related to —
Payee’s status
Effectively connected income
Partnership and its partners
Estate or trust and its beneficiaries or
owner
Foreign tax-exempt organizations
(including private foundations)
Publication 515 (April 2008)
the country in which your office is lo-
cated and that country has an income
tax treaty in effect with the United
States.
2. The mailing or residence address is in the
United States, you receive the documen-
tary evidence from an entity (other than a
flow-through entity) and:
a. You possess or obtain documentation
to substantiate that the entity is actually
organized under the laws of a foreign
country,
b. You obtain a valid Form W-8 that con-
tains a permanent residence address
and mailing address outside the United
States (or if a mailing address is inside
the United States, the account holder
provides additional documentary evi-
dence sufficient to establish the account
holder’s foreign status, or the Form W-8
was received before December 31,
2001), or
c. The account is maintained at an office
outside the United States and you are
required to report annually a payment to
the account holder on a tax information
statement filed with the tax authority of
the country in which your office is lo-
cated and that country has an income
tax treaty in effect with the United
States.
3. You have instructions to pay amounts to
an address or an account in the United
States and the account holder provides
you with a reasonable explanation, in writ-
ing, that supports the account holder’s for-
eign status.
Claim of reduced rate of withholding under
treaty. You have reason to know that docu-
mentary evidence provided by a direct account
holder to claim a reduced rate of withholding
under a treaty is unreliable or incorrect for pur-
poses of establishing the account holder’s resi-
dency in a treaty country if:
• You have a mailing or residence address
for the account holder that is outside the
applicable treaty country,
• The only address that you have (whether
in or outside the treaty country) is a P.O.
box, an in-care-of address, or the address
of a financial institution (that is not the
beneficial owner of the income), or
See regulation section —
1.1441-1(b)(3); 1.6049-5(d)
1.1441-4(a)(2)
1.1441-5(d); 1.1446-1(c)(3)
1.1441-5(e)(6)
1.1441-9(b)(3)
11:14 - 23-APR-2008
• The account holder has standing instruc-
tions for you to pay amounts from its ac-
count to an address or account not in the
treaty country.
You may, however, rely on documentary evi-
dence as establishing an account holder’s claim
of a reduced rate of withholding under a treaty if
any of the following apply.
1. The mailing or residence address is
outside the treaty country and:
a. You possess or obtain additional docu-
mentary evidence supporting the ac-
count holder’s claim of residence in the
treaty country (and the documentary ev-
idence does not contain an address
outside the treaty country, a P.O. box,
an in-care-of address, or the address of
a financial institution),
b. You possess or obtain documentary ev-
idence that establishes that the account
holder is an entity organized in a treaty
country, or
c. You obtain a valid Form W-8BEN that
contains a permanent residence ad-
dress and a mailing address in the ap-
plicable treaty country.
2. You have instructions to pay amounts
outside the treaty country and the account
holder gives you a reasonable explanation,
in writing, establishing residence in the ap-
plicable treaty country.
Indirect Account Holders
A financial institution that receives documenta-
tion from a payee through a nonqualified inter-
mediary, a flow-through entity, or a U.S. branch
of a foreign bank or insurance company subject
to U.S. or state regulatory supervision has rea-
son to know that the documentary evidence is
unreliable or incorrect if a reasonably prudent
person in the financial institution’s position
would question the claims made. This standard
requires, but is not limited to, compliance with
the following rules.
Withholding statement. You must review the
withholding statement provided with Form
W-8IMY and may not rely on information in the
statement to the extent the information does not
support the claims made for a payee. You may
not treat a payee as a foreign person if a U.S.
address is provided for the payee. You may not
treat a person as a resident of a country with
which the United States has an income tax
treaty if the address for the person is outside the
treaty country.
You may, however, treat a payee as a for-
eign person and may treat a foreign person as a
resident of a treaty country if a reasonable ex-
planation is provided, in writing, by the nonquali-
fied intermediary, flow-through entity, or U.S.
branch.
Withholding certificate. If you receive a
Form W-8 for a payee in association with a Form
W-8IMY, you must review each Form W-8 and
verify that the information is consistent with the
information on the withholding statement. If
there is a discrepancy, you may rely on the Form
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W-8, if valid, and instruct the nonqualified inter-
mediary, flow-through entity, or U.S. branch to
correct the withholding statement, or, alterna-
tively, you may apply the presumption rules,
discussed later, to the payee.
Documentary evidence. If you receive docu-
mentary evidence for a payee in association
with a Form W-8IMY, you must review the docu-
mentary evidence provided by the nonqualified
intermediary, flow-through entity or U.S. branch
to determine that there is no obvious indication
that the payee is a U.S. person subject to Form
1099 reporting or that the documentary evi-
dence does not establish the identity of the per-
son who provided the documentation (for
example, the documentary evidence does not
appear to be an identification document).
Presumption Rules
If you cannot reliably associate a payment with
valid documentation, you must apply certain
presumption rules or you may be liable for tax,
interest, and penalties. If you comply with the
presumption rules, you are not liable for tax,
interest, and penalties even if the rate of with-
holding that should have been applied based on
the payee’s actual status is different from that
presumed.
The presumption rules apply to determine
the status of the person you pay as a U.S. or
foreign person and other relevant characteris-
tics, such as whether the payee is a beneficial
owner or intermediary, and whether the payee is
an individual, corporation, partnership, or trust.
You are not permitted to apply a reduced rate of
NRA withholding based on a payee’s presumed
status if documentation is required to establish a
reduced rate of withholding. For example, if the
payee of interest is presumed to be a foreign
person, you may not apply the portfolio interest
exception or a reduced rate of withholding under
a tax treaty since both exceptions require docu-
mentation.
If you rely on your actual knowledge about a
payee’s status and withhold an amount less
than that required under the presumption rules
or do not report a payment that is subject to
reporting under the presumption rules, you may
be liable for tax, interest, and penalties. You
should, however, rely on your actual knowledge
if doing so results in withholding an amount
greater than would apply under the presumption
rules or in reporting an amount that would not be
Chart B. Summary of Source Rules for FDAP Income
Type of Income:
Pay for personal services
Dividends
Interest
Rents
Royalties — Patents, copyrights, etc.
Royalties — Natural resources
Pensions due to personal services performed Where services were performed while a
nonresident alien
Scholarships and fellowship grants
Page 14
subject to reporting under the presumption
rules.
The presumption rules, in the absence of
documentation, for the subject matter are dis-
cussed in the regulation section indicated on
Chart A.
Income Subject to
NRA Withholding
This section explains how to determine if a pay-
ment is subject to NRA withholding.
A payment is subject to NRA withholding if it
is from sources within the United States, and it is
either:
• Fixed or determinable annual or periodical
(FDAP) income, or
• Certain gains from the disposition of tim-
ber, coal, and iron ore, or from the sale or
exchange of patents, copyrights, and simi-
lar intangible property.
In addition, a payment is subject to NRA with-
holding if withholding is specifically required,
even though it may not constitute U.S. source
income or FDAP income. For example, corpo-
rate distributions may be subject to NRA with-
holding even though a portion of the distribution
may be a return of capital or capital gain not
otherwise subject to NRA withholding.
Amounts not subject to NRA withholding.
The following amounts are not subject to NRA
withholding.
• Portfolio interest on bearer obligations or
foreign-targeted registered obligations if
those obligations meet certain require-
ments. See Interest, later.
• Bank deposit interest that is not effectively
connected with the conduct of a U.S. trade
or business. See Interest, later.
• Original issue discount on obligations pay-
able 183 days or less from the date of
original issue. See Original issue discount,
later.
• Nonbusiness gambling income of a non-
resident alien playing blackjack, baccarat,
craps, roulette, or big-6 wheel in the
United States. See Gambling winnings,
later.
Source Determined by:
Where services are performed
Type of corporation (U.S. or foreign)
Residence of payer
Where property is located
Where property is used
Where property is located
Generally, residence of payer
11:14 - 23-APR-2008
• Amounts paid as part of the purchase
price of an obligation sold between inter-
est payment dates. See Interest, later.
• Original issue discount paid on the sale of
an obligation other than a redemption. See
Original issue discount, later.
• Insurance premiums paid on a contract is-
sued by a foreign insurer.
Source of Income
Generally, income is from U.S. sources if it is
paid by domestic corporations, U.S. citizens or
resident aliens, or entities formed under the laws
of the United States or a state. Income is also
from U.S. sources if the property that produces
the income is located in the United States or the
services for which the income is paid were per-
formed in the United States. A payment is
treated as being from sources within the United
States if the source of the payment cannot be
determined at the time of payment, such as fees
for personal services paid before the services
have been performed. Other source rules are
summarized in Chart B and explained in detail in
the separate discussions under Withholding on
Specific Income, later.
Generally, interest on an obligation of a for-
eign corporation or foreign partnership is for-
eign-source income. If the entity is engaged in a
trade or business in the United States during its
tax year, interest paid by such entity is treated as
from U.S. sources only if the interest is paid by a
U.S. trade or business conducted by the entity or
is allocable to income that is treated as effec-
tively connected with the conduct of a U.S. trade
or business. This applies to a foreign partner-
ship only if it is predominantly engaged in the
active conduct of a trade or business outside the
United States.
Personal service income. If the income is for
personal services performed in the United
States, it is from U.S. sources. The place where
the services are performed determines the
source of the income, regardless of where the
contract was made, the place of payment, or the
residence of the payer.
However, under certain circumstances, pay-
ment for personal services performed in the
United States is not considered income from
sources within the United States. For informa-
tion on this exception, see Pay for dependent
personal services under Pay for Personal Serv-
ices Performed, later.
If the income is for personal services per-
formed partly in the United States and partly
outside the United States, you must make an
accurate allocation of income for services per-
formed in the United States based on the facts
and circumstances. In most cases, you make
this allocation on a time basis. That is, U.S.
source income is the amount that results from
multiplying the total amount of pay by the follow-
ing fraction:
Number of days services are performed in the
United States
Total number of days of service for which
compensation is paid
Employees. If the services are performed
partly in the United States and partly outside the
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United States by an employee, the allocation of
pay, other than certain fringe benefits, is deter-
mined on a time basis. The following fringe ben-
efits are sourced on a geographical basis as
shown in the following list.
• Housing – employee’s main job location.
• Education – employee’s main job location.
• Local transportation – employee’s main
job location
• Tax reimbursement – jurisdiction impos-
ing tax.
• Hazardous or hardship duty pay – loca-
tion of pay zone.
• Moving expense reimbursement – em-
ployee’s new main job location.
For information on what is included in these
benefits, see section 1.861-4(b)(2)(ii)(D) of the
regulations.
An employee’s main job location (principal
place of work) is usually the place where the
employee spends most of his or her working
time. If there is no one place where most of the
work time is spent, the main job location is the
place where the work is centered, such as where
the employee reports for work or is otherwise
required to base his or her work.
An employee can use an alternative basis
based on facts and circumstances, rather than
the time or geographical basis. The employee,
not the employer, must demonstrate that the
alternative basis more properly determines the
source of the pay or fringe benefits.
Territorial limits. Wages received for serv-
ices rendered inside the territorial limits of the
United States and wages of an alien seaman
earned on a voyage along the coast of the
United States are regarded as from sources in
the United States. Wages or salaries for per-
sonal services performed in a mine or on an oil
or gas well located or being developed on the
continental shelf of the United States are treated
as from sources in the United States.
Income from the performance of services
directly related to the use of a vessel or aircraft is
treated as derived entirely from sources in the
United States if the use begins and ends in the
United States. This income is subject to NRA
withholding if it is not effectively connected with
a U.S. trade or business. If the use either begins
or ends in the United States, see Transportation
income, later.
Crew members. Income from the perform-
ance of services by a nonresident alien in con-
nection with the individual’s temporary presence
in the United States as a regular member of the
crew of a foreign vessel engaged in transporta-
tion between the United States and a foreign
country or a U.S. possession is not income from
U.S. sources.
Scholarships, fellowships, and grants.
Scholarships, fellowships, and grants are
sourced according to the residence of the payer.
Those made by entities created or domiciled in
the United States are generally treated as in-
come from sources within the United States.
However, see Activities outside the United
States, next. Those made by entities created or
domiciled in a foreign country are treated as
income from foreign sources.
Publication 515 (April 2008)
Activities outside the United States. A
scholarship, fellowship, grant, targeted grant, or
an achievement award received by a nonresi-
dent alien for activities conducted outside the
United States is treated as foreign source in-
come.
Pension payments. The source of pension
payments is determined by the portion of the
distribution that constitutes the compensation
element (employer contributions) and the por-
tion that constitutes the earnings element (the
investment income).
The compensation element is sourced the
same as compensation from the performance of
personal services. The portion attributable to
services performed in the United States is U.S.
source income, and the portion attributable to
services performed outside the United States is
foreign source income.
Employer contributions to a defined benefit
plan covering more than one individual are not
made for the benefit of a specific participant, but
are made based on the total liabilities to all
participants. All funds held under the plan are
available to provide benefits to any participant. If
the payment is from such a plan, you can use
the method in Revenue Procedure 2004-37 to
allocate the payment to sources in and out of the
United States. You can find Revenue Procedure
2004-37 on page 1099 of Internal Revenue Bul-
letin 2004-26 at www.irs.gov/pub/irs-irbs/
irb04-26.pdf.
The earnings portion of a pension payment is
U.S. source income if the trust is a U.S. trust.
Fixed or Determinable
Annual or Periodical Income
(FDAP)
FDAP income is all income except:
• Gains from the sale of property (including
market discount and option premiums but
not including original issue discount), and
• Items of income excluded from gross in-
come without regard to U.S. or foreign sta-
tus of the owner of the income, such as
tax-exempt municipal bond interest and
qualified scholarship income.
The following items are examples of FDAP
income.
• Compensation for personal services.
• Dividends.
• Interest.
• Original issue discount.
• REMIC excess inclusion income.
• Pensions and annuities.
• Alimony.
• Real property income, such as rents, other
than gains from the sale of real property.
• Royalties.
• Taxable scholarships and fellowship
grants.
• Other taxable grants, prizes, and awards.
• A sales commission paid or credited
monthly.
11:14 - 23-APR-2008
• A commission paid for a single transac-
tion.
• The distributable net income of an estate
or trust that is FDAP income and must be
distributed currently, or has been paid or
credited during the tax year.
• FDAP income distributed by a partnership
that, or such an amount that, although not
actually distributed, is includible in the
gross income of a foreign partner.
• Taxes, mortgage interest, or insurance
premiums paid to or for the account of, a
nonresident alien landlord by a tenant
under the terms of a lease.
• Publication rights.
• Prizes awarded to nonresident alien artists
for pictures exhibited in the United States.
• Purses paid to nonresident alien boxers
for prize fights in the United States.
• Prizes awarded to nonresident alien pro-
fessional golfers in golfing tournaments in
the United States.
Installment payments. Income can be FDAP
income whether it is paid in a series of repeated
payments or in a single lump sum. For example,
$5,000 in royalty income would be FDAP in-
come whether paid in 10 payments of $500 each
or in one payment of $5,000.
Insurance proceeds. Income derived by an
insured nonresident alien from U.S. sources
upon the surrender of, or at the maturity of, a life
insurance policy, is FDAP income and is subject
to NRA withholding. This includes income de-
rived under a life insurance contract issued by a
foreign branch of a U.S. life insurance company.
The proceeds are income to the extent they
exceed the cost of the policy.
However, certain payments received under a
life insurance contract on the life of a terminally
or chronically ill individual before death (acceler-
ated death benefits) may not be subject to tax.
This also applies to certain payments received
for the sale or assignment of any portion of the
death benefit under contract to a viatical settle-
ment provider. See Publication 525, Taxable
and Nontaxable Income, for more information.
Racing purses. Racing purses are FDAP in-
come and racetrack operators must withhold
30% on any purse paid to a nonresident alien
racehorse owner in the absence of definite infor-
mation contained in a statement filed together
with a Form W-8BEN that the owner has not
raced, or does not intend to enter, a horse in
another race in the United States during the tax
year. If available information indicates that the
racehorse owner has raced a horse in another
race in the United States during the tax year,
then the statement and Form W-8BEN filed for
that year are ineffective. The owner may be
exempt from withholding of tax at 30% on the
purses if the owner gives you Form W-8ECI,
which provides that the income is effectively
connected with the conduct of a U.S. trade or
business and that the income is includible in the
owner’s gross income.
Covenant not to compete. Payment received
for a promise not to compete is FDAP income.
Page 15
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Its source is the place where the promisor for- • Whether the activities of that trade or busi- 1. Pay for personal services performed by an
feited his or her right to act. Amounts paid to a ness were a material factor in the realiza- individual,
nonresident alien for his or her promise not to tion of the income.
2. Effectively connected taxable income of a
compete in the United States are subject to NRA
partnership that is allocable to its foreign
withholding.
Income from securities. There is a special partners (see Partnership Withholding on
rule determining whether income from securities Effectively Connected Income, later),
is effectively connected with the active conduct
3. Income from the disposition of a U.S. real
of a U.S. banking, financing, or similar business.
Withholding on If the foreign person’s U.S. office actively
property interest (see U.S. Real Property
Interest, later), or
and materially participates in soliciting, negotiat-
Specific Income ing, or performing other activities required to 4. Payments to a foreign corporation for per-
arrange the acquisition of securities, the U.S. sonal services if all of the following apply:
Different kinds of income are subject to different
source interest or dividend income from the se-
withholding requirements. a. The foreign corporation otherwise quali-
curities, gain or loss from their sale or exchange,
fies as a personal holding company for
or, income or gain economically equivalent to
Effectively Connected such amounts, is attributable to the U.S. office income tax purposes,
Income and is effectively connected income. b. The foreign corporation receives
amounts under a contract for personal
Generally, when a foreign person engages in a Withholding exemption. Generally, you do services of an individual whom the cor-
trade or business in the United States, all in- not need to withhold tax on income if you receive poration has no right to designate, and
come from sources in the United States con- a Form W-8ECI on which a foreign payee repre-
nected with the conduct of that trade or business sents that: c. 25% or more in value of the outstanding
is considered effectively connected with a U.S. stock of the foreign corporation at some
business. FDAP income may or may not be • The foreign payee is the beneficial owner time during the tax year is owned, di-
of the income, rectly or indirectly, by or for an individ-
effectively connected with a U.S. business. For
example, effectively connected income includes • The income is effectively connected with ual who has performed, is to perform or
rents from real property if the alien chooses to the conduct of a trade or business in the may be designated as the one to per-
treat that income as effectively connected with a United States, and form, the services called for under the
U.S. trade or business. contract.
• The income is includible in the payee’s
The factors to be considered in establishing
gross income.
whether FDAP income and similar amounts are Notional principal contract income. Pay-
effectively connected with a U.S. trade or busi- ment of an amount attributable to a notional
This withholding exemption applies to income
ness include: principal contract is not subject to NRA withhold-
for services performed by a foreign partnership
• Whether the income is from assets used or foreign corporation (unless item (4) below ing regardless of whether a Form W-8ECI is
in, or held for use in, the conduct of that applies to the corporation). The exemption does provided. However, income from a notional prin-
trade or business, or not apply, however, to: cipal contract is subject to reporting on Form
1042-S if it is effectively connected with the
Chart C. Withholding Tax Rates conduct of a trade or business in the United
States. You must treat the income as effectively
connected with a U.S. trade or business if you
(Note. You must withhold tax at the following rates on payments of income unless a reduced rate pay the income to, or to the account of, a quali-
or exemption is authorized under a tax treaty. The President may apply higher tax rates on income fied business unit (a branch) of a foreign person
paid to residents or corporations of foreign countries that impose burdensome or discriminatory located in the United States, or a qualified busi-
taxes on U.S. persons.) ness unit located outside the United States and
you know, or have reason to know, the income is
Type of Income Rate effectively connected with the conduct of a U.S.
trade or business. You do not need to treat
Taxable part of U.S. scholarship or fellowship grant paid to notional principal contract income as effectively
holder of “F” “J” “M” or “Q” visa (see Scholarship and connected if you receive a Form W-8BEN that
Fellowship Grants, later) 14% represents that the income is not effectively con-
Gross investment income from interest, dividends, rents, and nected with the conduct of a U.S. trade or busi-
royalties paid to a foreign private foundation 4% ness or if the payee provides a representation in
a master agreement or in the confirmation on the
Pensions — part paid for personal services (see Pensions, Graduated rates in particular notional principal contract transaction
Annuities, and Alimony, later) Circular A or Circular E that the payee is a U.S. person or a non-U.S.
Wages paid to a nonresident alien employee (see Pay for Graduated rates in branch of a foreign person.
Personal Services Performed, later) Circular A or Circular E Income paid to U.S. branch of foreign bank
Each foreign partner’s share of effectively connected income or insurance company. A payment to a U.S.
of the partnership (see Partnership Withholding on branch of a foreign bank or a foreign insurance
Effectively Connected Income, later) 35% company that is subject to U.S. regulation by the
Federal Reserve or state insurance authorities
Distributions of effectively connected income to foreign is presumed to be effectively connected with the
partners by publicly traded partnerships (see Publicly Traded conduct of a trade or business in the United
Partnerships, later) 35% States unless the branch provides a Form
Dispositions of U.S. real property interests (see U.S. Real W-8BEN or Form W-8IMY for the income. If a
Property Interest, later) 10% * U.S. branch of a foreign bank or insurance com-
pany receives income that the payer did not
Dividends paid to Puerto Rico corporation 10% withhold upon because of the presumption that
the income was effectively connected with the
All other income subject to withholding 30%
U.S. branch’s trade or business, the U.S. branch
*35% in the case of certain distributions by corporations, partnerships, trusts, or estates. is required to withhold on the income if it is in fact
not effectively connected with the conduct of its

Page 16 Publication 515 (April 2008)

Page 17 of 58 of Publication 515
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trade or business in the United States. Withhold-
ing is required whether the payment was col-
lected on behalf of other persons or on behalf of
another branch of the same entity.
Income Not
Effectively Connected
This section discusses the specific types of in-
come that are subject to NRA withholding. The
income codes contained in this section corre-
spond to the income codes used on Form
1042-S (discussed later), and in most cases, on
Tables 1 and 2 found at the end of this publica-
tion.
You must withhold tax at the statutory rates
shown in Chart C unless a reduced rate or ex-
emption under a tax treaty applies. For U.S.
source gross income that is not effectively con-
nected with a U.S. trade or business, the rate is
usually 30%. Generally, you must withhold the
tax at the time you pay the income to the foreign
person. See When to withhold, earlier.
Interest
Interest from U.S. sources paid to foreign pay-
ees is subject to NRA withholding. When making
a payment on an interest bearing obligation, you
must withhold on the gross amount of stated
interest payable on the interest payment date,
even if the payment or a portion of the payment
may be a return of capital rather than interest.
A substitute interest payment made to the
transferor of a security in a securities lending
transaction or a sale-repurchase transaction is
treated the same as the interest on the trans-
ferred security. Use Income Code 33 to report
these substitute payments.
Interest paid by U.S. obligors — general (In-
come Code 1). With specific exceptions, such
as portfolio interest, you must withhold on inter-
est paid or credited on bonds, debentures,
notes, open account indebtedness, governmen-
tal obligations, certain deferred payment ar-
rangements (as provided in section 483 of the
Internal Revenue Code) or other evidences of
indebtedness of U.S. obligors. U.S. obligors in-
clude the U.S. Government or its agencies or
instrumentalities, any U.S. citizen or resident,
any U.S. corporation, and any U.S. partnership.
If, in a sale of a corporation’s property, pay-
ment of the bonds or other obligations of the
corporation is assumed by the buyer, that buyer,
whether an individual, partnership, or corpora-
tion, must deduct and withhold the taxes that
would be required to be withheld by the selling
corporation as if there had been no sale or
transfer. Also, if interest coupons are in default,
the tax must be withheld on the gross amount of
interest whether or not the payment is a return of
capital or the payment of income.
A resident alien paying interest on a margin
account maintained with a foreign brokerage
firm must withhold from the interest whether the
interest is paid directly or constructively.
Interest on bonds of a U.S. corporation paid
to a foreign corporation not engaged in a trade
or business in the United States is subject to
NRA withholding even if the interest is guaran-
teed by a foreign corporation that made pay-
ment outside the United States.
Publication 515 (April 2008)
Domestic corporations must withhold on in-
terest credited to foreign subsidiaries or foreign
parents.
Original issue discount (Income Code 30).
Original issue discount paid on the redemption
of an obligation is subject to NRA withholding.
Original issue discount paid as part of the
purchase price of an obligation sold or ex-
changed, other than in a redemption, is not sub-
ject to NRA withholding unless the purchase is
part of a plan the principal purpose of which is to
avoid tax and the withholding agent has actual
knowledge or reason to know of the plan. With-
holding is required by a person other than the
issuer of an obligation (or the issuer’s agent)
only if the obligation is issued after December
31, 2000.
The original issue discount subject to NRA
withholding is the taxable amount of original
issue discount. The taxable amount is the origi-
nal issue discount that accrued while the obliga-
tion was held by the foreign beneficial owner up
to the time the obligation was sold or exchanged
or a payment was made, reduced by any original
issue discount that was previously taxed. If a
payment was made, the tax due on the original
issue discount may not exceed the payment
reduced by the tax imposed on the portion of the
payment that is qualified stated interest.
If you cannot determine the taxable amount,
you must withhold on the entire amount of origi-
nal issue discount accrued from the date of
issue until the date of redemption (or sale or
exchange, if subject to NRA withholding) deter-
mined on the basis of the most recently pub-
lished Publication 1212, Guide to Original Issue
Discount (OID) Instruments.
For more information on original issue dis-
count, see Publication 550, Investment Income
and Expenses.
Reduced Rates of
Withholding on Interest
Certain interest is subject to a reduced rate of, or
exemption from, withholding.
Portfolio interest. Interest and original issue
discount that qualifies as portfolio interest is not
subject to NRA withholding. To qualify as portfo-
lio interest, the interest must be otherwise sub-
ject to NRA withholding, must be paid on
obligations issued after July 18, 1984, and must
meet certain other requirements.
Obligations not in registered form. Inter-
est on an obligation that is not in registered form
(bearer obligation) is portfolio interest if the obli-
gation is foreign-targeted. A bearer obligation is
foreign-targeted if:
• There are arrangements to ensure that the
obligation will be sold, or resold in connec-
tion with the original issue, only to a per-
son who is not a United States person,
• Interest on the obligation is payable only
outside the United States and its posses-
sions, and
• The face of the obligation contains a state-
ment that any United States person who
holds the obligation will be subject to limits
under the United States income tax laws.
11:14 - 23-APR-2008
Documentation is not required for interest on
bearer obligations to qualify as portfolio interest.
In some cases, however, you may need docu-
mentation for purposes of Form 1099 reporting
and backup withholding.
Obligations in registered form. Portfolio
interest includes interest paid on an obligation
that is in registered form, and for which you have
received documentation that the beneficial
owner of the obligation is not a United States
person.
If the registered obligation is not targeted to
foreign markets, you must receive documenta-
tion on which you may rely to treat the payee as
a foreign person that is the beneficial owner of
the interest. The documentation required is a
valid Form W-8BEN (a valid Form W-8EXP from
an entity that completes the Form W-8EXP for
other purposes is also acceptable) or, if allowa-
ble, valid documentary evidence. See Docu-
mentation, earlier.
A registered obligation is targeted to foreign
markets if it is sold (or resold in connection with
its original issuance) only to foreign persons or
to foreign branches of U. S. financial institutions
in accordance with procedures similar to those
provided under section 1.163-5(c)(2)(i) of the
regulations. However, the procedure that re-
quires the obligation to be offered for sale (or
resale) only outside the United States does not
apply if the registered obligation is offered for
sale through a public auction. Also, the proce-
dure that requires the obligation to be delivered
outside the United States does not apply if the
obligation is considered registered because it
may be transferred only through a book entry
system and the obligation is offered for sale
through a public auction. The documentation
needed depends on whether the interest is paid
to a financial institution, a member of a clearing
organization, or to some other foreign person.
Dematerialized book-entry systems.
Under these systems, bonds are required to be
represented only by book entries, and no physi-
cal certificates are issued or transferred. The
bonds are transferred only by book entries.
These bonds are considered to be in registered
form if the holder may only obtain a physical
certificate in bearer form when the clearing or-
ganization that maintains the book-entry system
goes out of business without a successor. Gen-
erally, these rules apply to bonds issued after
December 31, 2006. A bond issued in bearer
form before January 1, 2007, may continue to be
treated as such until its maturity even if it is held
under a book-entry system.
Interest that does not qualify as portfolio
interest. Payments to certain persons and
payments of contingent interest do not qualify as
portfolio interest. You must withhold at the statu-
tory rate on such payments unless some other
exception, such as a treaty provision applies.
Ten-percent owners. Interest paid to a for-
eign person that owns 10% or more of the total
combined voting power of all classes of stock of
a corporation, or 10% or more of the capital or
profits interest in a partnership, that issued the
obligation on which the interest is paid is not
portfolio interest. To determine 10% ownership,
see Regulations section 1.871-14(g).
Banks. Except in the case of interest paid
on an obligation of the United States, interest
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Page 18 of 58 of Publication 515
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paid to a bank on an extension of credit made
pursuant to a loan agreement entered into in the
ordinary course of the bank’s trade or business
does not qualify as portfolio interest.
Controlled foreign corporations. Interest
paid to a controlled foreign corporation from a
person related to the controlled foreign corpora-
tion is not portfolio interest.
Contingent interest. Portfolio interest gen-
erally does not include contingent interest. Con-
tingent interest is interest that is determined by
reference to any of the following.
• Any receipts, sales, or other cash flow of
the debtor or related person.
• Income or profits of the debtor or related
person.
• Any change in value of any property of the
debtor or a related person.
• Any dividend, partnership distributions, or
similar payments made by the debtor or a
related person.
The term “related person” is defined in section
871(h)(4)(B) of the Internal Revenue Code.
The contingent interest rule does not apply to
any interest paid or accrued on any indebted-
ness with a fixed term that was issued:
• On or before April 7, 1993, or
• After April 7, 1993, pursuant to a written
binding contract in effect on that date and
at all times thereafter before that indebted-
ness was issued.
Interest on real property mortgages (Income
Code 2). Certain treaties (see Table 1) permit
a reduced rate or exemption for interest paid or
credited on real property mortgages. This is in-
terest paid on any type of debt instrument that is
secured by a mortgage or deed of trust on real
property located in the United States, regardless
of whether the mortgagor (or grantor) is a U.S.
citizen or a U.S. business entity.
REMIC excess inclusions. A domestic
partnership must separately state a partner’s
allocable share of REMIC taxable income or net
loss and the excess inclusion amount on Sched-
ule K-1 (Form 1065). If the partnership allocates
all or some portion of its allocable share of
REMIC taxable income to a foreign partner, the
partner must include the partner’s allocated
amount in income as if that amount was re-
ceived on the earlier of the following dates.
1. The date of distribution by the partnership.
2. The date the foreign partner disposed of its
indirect interest in the REMIC residual in-
terest.
3. The last day of the partnership’s tax year.
For purposes of item (2), the disposition may
occur as a result of:
• A termination of the REMIC,
• A disposition of the partnership’s residual
interest in the REMIC,
• A disposition of the foreign partner’s inter-
est in the partnership, or
Page 18
• Any other reduction in the foreign partner’s
allocable share of the partnership’s portion
of the REMIC net income or deduction.
The partnership must withhold tax on the
portion of the REMIC amount that is an excess
inclusion. Excess inclusion income is treated as
income from sources in the United States and is
not eligible for any reduction in withholding tax
(by treaty or otherwise).
An excess inclusion allocated to the follow-
ing foreign persons must be included in that
person’s income at the same time as other in-
come from the entity is included in income.
• Shareholder of a real estate investment
trust.
• Shareholder of a regulated investment
trust.
• Participant in a common trust fund.
• Patron of a subchapter T cooperative or-
ganization.
The entity must withhold on the excess inclu-
sion.
For information on the taxation and reporting
of excess inclusion income by REITs, RICs, and
other pass-through entities, see Notice 2006-97
on page 904 of Internal Revenue Bulletin
2006-46 at www.irs.gov/pub/irs-irbs/irb06-46.
pdf.
Interest paid to controlling foreign corpora-
tions (Income Code 3). A treaty may permit a
reduced rate or exemption for interest paid by a
domestic corporation to a controlling foreign cor-
poration. The interest may be on any type of
debt including open or unsecured accounts pay-
able, notes, certificates, bonds, or other evi-
dences of indebtedness.
Interest paid by foreign corporations (In-
come Code 4). If a foreign corporation is
engaged in a U.S. trade or business, any inter-
est paid by the foreign corporation’s trade or
business in the United States (branch interest) is
subject to NRA withholding as if paid by a do-
mestic corporation (without considering the
“payer having income from abroad” exception).
As a result, the interest paid to foreign payees is
generally subject to NRA withholding. In addi-
tion, if “allocable interest” exceeds the branch
interest paid, the excess interest is also subject
to tax and reported on the foreign corporation’s
income tax return, Form 1120-F. See Instruc-
tions for Form 1120-F for more information.
If there is no treaty provision that reduces the
rate of withholding on branch interest, you must
withhold tax at the statutory rate of 30% on the
interest paid by a foreign corporation’s U.S.
trade or business.
In general, payees of interest from a U.S.
trade or business of a foreign corporation are
entitled to reduced rates of, or exemption from,
tax under a treaty in the same manner and
subject to the same conditions as if they had
received the interest from a domestic corpora-
tion. However, a foreign corporation that re-
ceives interest paid by a U.S. trade or business
of a foreign corporation must also be a qualified
resident of its country of residence to be entitled
to benefits under that country’s tax treaty. If the
foreign corporation is a resident of a country that
has entered into an income tax treaty since 1987
that contains a limitation on benefits article, the
11:14 - 23-APR-2008
foreign corporation need only satisfy the limita-
tion on benefits article in that treaty to qualify for
a reduced rate of tax.
Alternatively, a payee may be entitled to
treaty benefits under the payer’s treaty if there is
a provision in that treaty that applies specifically
to interest paid by the payer foreign corporation.
This provision may exempt all or a part of this
interest. Some treaties provide for an exemption
regardless of the payee’s residence or citizen-
ship, while others provide for an exemption ac-
cording to the payee’s status as a resident or
citizen of the payer’s country.
A foreign corporation that pays interest must
be a qualified resident (under section 884 of the
Internal Revenue Code) of its country of resi-
dence for the payer’s treaty to exempt payments
from tax by the foreign corporation. However, if
the foreign corporation is a resident of a country
that has entered into an income tax treaty since
1987 that contains a limitation on benefits arti-
cle, the foreign corporation need only satisfy the
limitation on benefits article in that treaty to qual-
ify for the exemption.
Interest on deposits (Income Code 29). For-
eign persons are not subject to withholding on
interest that is not connected with a U.S. trade or
business if it is from:
• Deposits with persons carrying on the
banking business,
• Deposits or withdrawable accounts with
savings institutions chartered and super-
vised under federal or state law as savings
and loan or similar associations, such as
credit unions, if the interest is or would be
deductible by the institutions, or
• Amounts left with an insurance company
under an agreement to pay interest on
them.
Deposits include certificates of deposit, open
account time deposits, Eurodollar certificates of
deposit, and other deposit arrangements.
The deposit interest exception does not re-
quire a Form W-8BEN. However, a Form
W-8BEN may be required for purposes of Form
1099 reporting and backup withholding.
You may have to file Form 1042-S to report
certain payments of interest on deposits.
Interest from foreign business arrange-
ments. In general, interest received from a
resident alien individual or a domestic corpora-
tion is not subject to NRA withholding if at least
80% of the payer’s gross income from all
sources has been from active foreign business
for the 3 tax years of the payer before the year in
which the interest is paid, or for the applicable
part of those 3 years. Active foreign business
income is gross income which is:
• Derived from sources outside the United
States, and
• Attributable to the active conduct of a
trade or business in a foreign country or
possession of the United States by the
individual or corporation.
However, limits apply if the recipient is consid-
ered to be a related person (see section 861(c)
of the Code). A foreign beneficial owner does
not need to provide a Form W-8 or documentary
Publication 515 (April 2008)
Page 19 of 58 of Publication 515
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evidence for this exception. However, documen-
tation may be required for purposes of Form
1099 reporting and backup withholding.
Sales of bonds between interest dates.
Amounts paid as part of the purchase price of an
obligation sold or exchanged between interest
payment dates is not subject to NRA withhold-
ing. This does not apply if the sale or exchange
is part of a plan the principal purpose of which is
to avoid tax and you have actual knowledge or
reason to know of the plan. The exemption from
NRA withholding applies even if you do not have
any documentation from the payee. However,
documentation may be required for purposes of
Form 1099 reporting and backup withholding.
Short-term obligations. Interest and original
issue discount paid on an obligation that was
issued at a discount and that is payable 183
days or less from the date of its original issue
(without regard to the period held by the tax-
payer) is not subject to NRA withholding. This
exemption applies even if you do not have any
documentation from the payee. However, docu-
mentation may be required for purposes of Form
1099 reporting and backup withholding.
Income from U.S. Savings Bonds of re-
sidents of the Ryukyu Islands or the Trust
Territory of the Pacific Islands. Interest from
a Series E, Series EE, Series H, or Series HH
U.S. Savings Bond is not subject to NRA with-
holding if the nonresident alien individual ac-
quired the bond while a resident of the Ryukyu
Islands or the Trust Territory of the Pacific Is-
lands.
Dividends
The following types of dividends paid to foreign
payees are generally subject to NRA withhold-
ing.
A substitute dividend payment made to the
transferor of a security in a securities lending
transaction or a sale-repurchase transaction is
treated the same as a distribution on the trans-
ferred security. Use Income Code 34 to report
these substitute payments.
Dividends paid to Puerto Rico corporation.
The tax rate on dividends paid to a corporation
created or organized in, or under the law of, the
Commonwealth of Puerto Rico is 10%, rather
than 30% if:
• At all times during the tax year less than
25% in value of the Puerto Rico corpora-
tion’s stock is owned, directly or indirectly,
by foreign persons,
• At least 65% of the Puerto Rico corpora-
tion’s gross income is effectively con-
nected with the conduct of a trade or
business in Puerto Rico or the United
States for the 3-year period ending with
the close of the tax year of that corpora-
tion (or the period the corporation or any
predecessor has been in existence, if
less), and
• No substantial part of the income of the
Puerto Rico corporation is used, directly or
indirectly, to satisfy obligations to a person
who is not a bona fide resident of Puerto
Rico or the United States.
Publication 515 (April 2008)
Dividends paid by U.S. corporations — gen-
eral (Income Code 6). This category includes
all distributions of domestic corporations (other
than dividends qualifying for direct dividend
rate — Income Code 7).
A corporation making a distribution with re-
spect to its stock or any intermediary making a
payment of such a distribution, is required to
withhold on the entire amount of the distribution.
However, a distributing corporation or intermedi-
ary may elect to not withhold on the part of the
distribution that:
1. Represents a nontaxable distribution pay-
able in stock or stock rights,
2. Represents a distribution in part or full pay-
ment in exchange for stock,
3. Is not paid out of current or accumulated
earnings and profits, based on a reasona-
ble estimate of the anticipated amount of
earnings and profits for the tax year of the
distribution made at a time reasonably
close to the date of the distribution,
4. Represents a capital gain dividend (use
Income Code 36) or an exempt interest
dividend by a regulated investment com-
pany, or
5. Is subject to withholding under section
1445 of the Code (withholding on disposi-
tions of U.S. real property interests) and
the distributing corporation is a U.S. real
property holding corporation or a qualified
investment entity.
The election is made by actually reducing the
amount of withholding at the time the distribution
is paid.
A qualified investment entity (QIE) is any real
estate investment trust (REIT) or any regulated
investment company (RIC) that is a U.S. real
property holding corporation. In determining if
the RIC is a U.S. real property holding corpora-
tion, the RIC is required to include as U.S. real
property interests its holdings of stock in a RIC
or REIT that is a U.S. real property holding
corporation, even if that stock is regularly traded
and the RIC owns less than 5% of the stock.
Dividends paid by a QIE. A distribution by
a QIE to a nonresident alien or a foreign corpo-
ration is treated as a dividend and is not subject
to withholding under section 1445 as a gain from
the sale or exchange of a U.S. real property
interest if:
• The distribution is on stock regularly
traded on a securities market in the United
States, and
• The individual or corporation did not own
more than 5% of that stock at any time
during the 1-year period ending on the
date of distribution.
If these requirements are not met, item (5) in the
previous list applies to the distribution.
The rules treating a RIC as a QIE do not apply
after December 31, 2007. However, a RIC will
continue to be treated as a QIE, for this purpose
and for purposes of section 1445, on any distri-
bution by the RIC to a nonresident alien or a
foreign corporation that is attributable to a distri-
bution received by the RIC from a REIT.
11:14 - 23-APR-2008
Dividends paid by a domestic corporation
(an “80/20” company). Generally, a percent-
age of any dividend paid by a domestic corpora-
tion that received at least 80% of its gross
income from the active conduct of a foreign
business for a testing period is not subject to
NRA withholding. The testing period is the 3 tax
years before the year in which the dividends are
declared, or shorter period if the corporation was
not in existence for 3 years. The percentage is
found by dividing the corporation’s foreign gross
income for the testing period by the corpora-
tion’s total gross income for that period.
Consent dividends. If you receive a Form
972, Consent of Shareholder To Include Spe-
cific Amount in Gross Income, from a nonresi-
dent alien individual or other foreign shareholder
who agrees to treat the amount as a taxable
dividend, you must pay and report on Form 1042
and Form 1042-S any withholding tax you would
have withheld if the dividend had been actually
paid.
Dividends paid by a RIC. Subject to certain
exceptions, no withholding is required on inter-
est-related dividends and short-term capital gain
dividends paid by a RIC. The no withholding rule
will not apply to any tax year of the RIC begin-
ning after December 31, 2007.
To qualify for this treatment, the RIC must
designate any part of a dividend as an inter-
est-related dividend or a short-term capital gain
dividend in a written notice mailed to the share-
holder not later than 60 days after close of the
RIC’s tax year. The amount designated is sub-
ject to dollar limitations.
The no withholding rule does not apply to
interest-related dividends:
• To the extent the dividend is attributable to
interest on debt issued by the person (or a
corporation or partnership of which that
person is a 10% owner) who receives the
dividend,
• Unless documentation is received indicat-
ing that the beneficial owner is a foreign
person, or
• Paid to a person in a foreign country (or
addressed to, or for the account of, per-
sons in a foreign country) during a period
specified for that country by the Commis-
sioner.
The no withholding rule does not apply to
short-term capital gain dividends paid to a non-
resident alien individual present in the United
States for 183 days or more during the tax year.
If the requirements discussed earlier under
Dividends paid by a QIE are met, the distribution
is not treated as a short-term capital gain divi-
dend. The distribution is treated as a dividend
and may be subject to withholding.
For more information on these dividends,
see section 871(k) of the Code and, for amounts
paid to a foreign corporation, section 881(e).
Dividends qualifying for direct dividend rate
(Income Code 7). A treaty may reduce the
rate of withholding on dividends from that which
generally applies under the treaty if the share-
holder owns a certain percentage of the voting
stock of the corporation. Generally, this prefer-
ential rate applies only if the shareholder directly
owns the required percentage, although some
treaties permit the percentage to be met by
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direct or indirect ownership. The preferential
rate may apply to the payment of a deemed
dividend under section 304(a)(1) of the Code.
Under some treaties, the preferential rate for
dividends qualifying for the direct dividend rate
applies only if no more than a certain percentage
of the paying corporation’s gross income for a
certain period consists of dividends and interest
other than dividends and interest from subsidiar-
ies or from the active conduct of a banking,
financing, or insurance business. A foreign per-
son claiming the direct dividend rate should
complete line 10 of Form W-8BEN regarding
special rates and conditions.
Consent dividends. If you receive a Form
972 from a foreign shareholder qualifying for the
direct dividend rate, you must pay and report on
Form 1042 and Form 1042-S any withholding
tax you would have withheld if the dividend had
been actually paid.
Dividends paid by foreign corporations (In-
come Code 8). Dividends paid by a foreign
corporation are generally not subject to NRA
withholding. This exception does not require a
Form W-8BEN. However, a Form W-8BEN may
be required for purposes of Form 1099 reporting
and backup withholding.
The payment to a foreign corporation by a
foreign corporation of a deemed dividend under
section 304(a)(1) of the Code is subject to NRA
withholding except to the extent it can be clearly
determined to be from foreign sources.
Corporation subject to branch profits tax.
If a foreign corporation is subject to branch prof-
its tax for any tax year, withholding is not re-
quired on any dividends paid by the corporation
out of its earnings and profits for that tax year.
Dividends may be subject to NRA withholding if
they are attributable to any earnings and profits
when the branch profits tax is prohibited by a tax
treaty.
A foreign person may claim a treaty benefit
on dividends paid by a foreign corporation to the
extent the dividends are paid out of earnings and
profits in a year in which the foreign corporation
was not subject to the branch profits tax. How-
ever, you may apply a reduced rate of withhold-
ing under an income tax treaty only under rules
similar to the rules that apply to treaty benefits
claimed on branch interest paid by a foreign
corporation. You should check the specific
treaty provision.
Gains
You generally do not need to withhold on gains
from the sale of real or personal property be-
cause it is not FDAP income. However, see U.S.
Real Property Interest, later.
Capital gains (Income Code 9). You must
withhold at 30%, or if applicable, a reduced
treaty rate, on the gross amount of the following
items:
• Gains on disposal of timber, coal, or do-
mestic iron ore with a retained economic
interest, unless an election is made to
treat those gains as income effectively
connected with a U.S. trade or business,
• Gains on contingent payments received
from the sale or exchange after October 4,
1966, of patents, copyrights, secret
Page 20
processes and formulas, goodwill, trade-
marks, trade brands, franchises, and other
like property,
• Gains on certain transfers of all substantial
rights to, or an undivided interest in, pat-
ents if the transfers were made before Oc-
tober 5, 1966, and
• Certain gains from the sale or exchange of
original issue discount obligations issued
after March 31, 1972. For more on with-
holding on original issue discount obliga-
tions, see Interest, earlier.
If you do not know the amount of the gain, you
must withhold an amount necessary to assure
that the tax withheld will not be less than 30% of
the recognized gain. The amount to be withheld,
however, must not be more than 30% of the
amount payable because of the transaction.
Unless you have reason to believe other-
wise, you may rely upon the written statement of
the person entitled to the income as to the
amount of gain. The Form W-8 or documentary
evidence must show the beneficial owner’s ba-
sis in the property giving rise to the gain.
Tax treaties. Many tax treaties exempt certain
types of gains from U.S. income tax. Be sure to
carefully check the provision of the treaty that
applies before allowing an exemption from with-
holding.
Royalties
In general, you must withhold tax on the pay-
ment of royalties from sources in the United
States. However, certain types of royalties are
given reduced rates or exemptions under some
tax treaties. Accordingly, these different types of
royalties are treated as separate categories for
withholding purposes.
Industrial royalties (Income Code 10). This
category of income includes royalties for the use
of, or the right to use, patents, trademarks, se-
cret processes and formulas, goodwill,
franchises, “know-how,” and similar rights. It
also may include rents for the use or lease of
personal property. Under certain tax treaties,
different rates may apply to royalties for informa-
tion concerning industrial, commercial, and sci-
entific know-how.
Motion picture or television copyright royal-
ties (Income Code 11). This category refers
to royalties paid for the use of motion picture and
television copyrights.
Other royalties (for example, copyright, re-
cording, publishing) (Income Code 12).
This category refers to the royalties paid for the
use of copyrights on books, periodicals, articles,
etc., except motion picture and television copy-
rights.
Real Property Income and
Natural Resources Royalties
(Income Code 13)
You must withhold tax on income (such as rents
and royalties) from real property located in the
United States and held for the production of
income, unless the foreign payee elects to treat
11:14 - 23-APR-2008
this income as effectively connected with a U.S.
trade or business. If the foreign payee chooses
to treat this income as effectively connected, the
payee must give you Form W-8ECI (discussed
earlier). This real property income includes roy-
alties from mines, wells, or other natural depos-
its, as well as ordinary rents for the use of real
property. For withholding that applies to the dis-
position of U.S. real property interests, see U.S.
Real Property Interest, later.
Pensions, Annuities, and
Alimony (Income Code 14)
The following rules apply to withholding on pen-
sions, annuities, and alimony of foreign payees.
Pensions and annuities. Generally, you
must withhold tax on the gross amount of pen-
sions and annuities that you pay that are from
sources within the United States. This includes
amounts paid under an annuity contract issued
by a foreign branch of a U.S. life insurance
company. However, most tax treaties provide
that private pensions and annuities are exempt
from withholding.
In the absence of a treaty exemption, you
must withhold at the statutory rate of 30% on the
entire distribution that is from sources within the
United States. You may, however, apply with-
holding at graduated rates to the portion of a
distribution that arises from the performance of
services in the United States after December 31,
1986.
Employer contributions to a defined benefit
plan covering more than one individual are not
made for the benefit of a specific participant, but
are made based on the total liabilities to all
participants. All funds held under the plan are
available to provide benefits to any participant. If
the distribution is from such a plan, you can use
the method in Revenue Procedure 2004-37 to
allocate the distribution to sources in the United
States. You can find Revenue Procedure
2004-37 on page 1099 of Internal Revenue Bul-
letin 2004-26 at www.irs.gov/pub/irs-irbs/
irb04-26.pdf.
The withholding rules that apply to payments
to foreign persons generally take precedence
over any other withholding rules that would ap-
ply to distributions from qualified plans and other
qualified retirement arrangements.
No withholding. Do not withhold tax on an
annuity payment to a nonresident alien if at the
time of the first payment from the plan, 90% or
more of the employees eligible for benefits
under the plan are citizens or residents of the
United States and the payment is:
1. For the nonresident’s personal services
performed outside the United States, or
2. For personal services by a nonresident in-
dividual present in the United States for 90
days or less during each tax year, whose
pay for those services does not exceed
$3,000, and the personal services are per-
formed for:
a. A nonresident alien individual, foreign
partnership, or foreign corporation not
engaged in a trade or business in the
United States, or
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b. An office or place of business of a U.S.
resident or citizen which is maintained
outside the United States.
If the payment otherwise qualifies under
these rules, but less than 90% of the employees
eligible for benefits are citizens or residents of
the United States, you still need not withhold tax
on the payment if:
• The recipient is a resident of a country that
gives a substantially equal exclusion to
U.S. citizens and residents, or
• The recipient is a resident of a beneficiary
developing country under the Trade Act of
1974.
The foreign person entitled to the payments
must provide you with a Form W-8BEN that
contains the TIN of the foreign person.
Alimony payments. Generally, alimony pay-
ments made by U.S. resident aliens to nonresi-
dent aliens are taxable and subject to NRA
withholding whether the recipients are residing
abroad or are temporarily present in the United
States.
Many tax treaties, however, provide for an
exemption from withholding for alimony pay-
ments. These treaties are shown in Table 1, by a
footnote reference under Income Code number
14.
Alimony payments made to a nonresident
alien by a U.S. ancillary administrator of a non-
resident alien estate are from foreign sources
and are not subject to withholding.
Scholarships and Fellowship
Grants (Income Code 15)
A scholarship or fellowship grant is an amount
given to an individual for study, training, or re-
search, and which does not constitute compen-
sation for personal services. Whether a
fellowship grant from U.S. sources is subject to
NRA withholding depends on the nature of the
payments and whether the recipient is a candi-
date for a degree. See Scholarships, fellow-
ships, and grants under Source of Income,
earlier.
Candidate for a degree. Do not withhold on a
qualified scholarship from U.S. sources granted
and paid to a candidate for a degree. A qualified
scholarship means any amount paid to an indi-
vidual as a scholarship or fellowship grant to the
extent that, in accordance with the conditions of
the grant, the amount is to be used for the
following expenses:
• Tuition and fees required for enrollment or
attendance at an educational organization,
and
• Fees, books, supplies, and equipment re-
quired for courses of instruction at the ed-
ucational organization.
The payment of a qualified scholarship to a
nonresident alien is not reportable and is not
subject to NRA withholding. However, the por-
tion of a scholarship or fellowship paid to a
nonresident alien which does not constitute a
qualified scholarship is reportable on Form
1042-S and is subject to NRA withholding. For
Publication 515 (April 2008)
example, those portions of a scholarship de-
voted to travel, room, and board are subject to
NRA withholding and are reported on Form
1042-S. The withholding rate is 14% on taxable
scholarship and fellowship grants paid to non-
resident aliens temporarily present in the United
States in “F,” “J,” “M,” or “Q” nonimmigrant sta-
tus. Payments made to nonresident alien indi-
viduals in any other immigration status are
subject to 30% withholding.
Nondegree candidate. If the person receiving
the scholarship or fellowship grant is not a candi-
date for a degree, and is present in the United
States in “F,” “J,” “M,” or “Q” nonimmigrant sta-
tus, you must withhold tax at 14% on the total
amount of the grant that is from U.S. sources if
the following requirements are met.
1. The grant must be for study, training, or
research in the United States.
2. The grant must be made by:
a. A tax-exempt organization operated for
charitable, religious, educational, etc.
purposes,
b. A foreign government,
c. A federal, state, or local government
agency, or
d. An international organization, or a bina-
tional or multinational educational or
cultural organization created or contin-
ued by the Mutual Educational and Cul-
tural Exchange Act of 1961 (known as
the Fulbright-Hays Act).
If the grant does not meet both (1) and (2)
above, you must withhold at 30% on the amount
of the grant that is from U.S. sources.
Alternate withholding procedure. You may
choose to treat the taxable part of a U.S. source
grant or scholarship as wages. The student or
grantee must have been admitted into the
United States on an “F,” “J,” “M,” or “Q” visa. The
student or grantee will know that you are using
this alternate withholding procedure when you
ask for a Form W-4.
The student or grantee must complete Form
W-4 annually following the instructions given
here and forward it to you, the payer of the
scholarship, or your designated withholding
agent. You may rely on the information on Form
W-4 unless you know or have reason to know it
is incorrect. You must file a Form 1042-S (dis-
cussed later) for each student or grantee who
gives you, or your withholding agent, a Form
W-4.
Each student or grantee who files a Form
W-4 must file an annual U.S. income tax return
to be allowed the exemptions and deductions
claimed on that form. If the individual is in the
United States during more than one tax year, he
or she must attach a statement to the annual
Form W-4 indicating that the individual has filed
a U.S. income tax return for the previous year. If
he or she has not been in the United States long
enough to have to file a return, the individual
must attach a statement to the Form W-4 saying
that a timely U.S. income tax return will be filed.
A prorated portion of allowable personal ex-
emptions based on the projected number of
days he or she will be in this country is allowed.
This is figured by multiplying the daily exemption
11:14 - 23-APR-2008
amount ($9.56 for 2008) by the number of days
the student or grantee expects to be in the
United States during the year. The prorated ex-
emption amount should be shown on line A of
the Personal Allowances Worksheet that comes
with Form W-4.
Generally, zero (-0-) should be shown on line
B of the worksheet. But, a student or grantee
who qualifies under Article 21(2) of the United
States-India income tax treaty can enter the
standard deduction if he or she does not claim
away-from-home expenses or other itemized
deductions (discussed later).
Generally, zero (-0-) should be shown on
lines C and D of the worksheet. But, an addi-
tional daily exemption amount may be allowed
for the spouse and each dependent if the stu-
dent or grantee is:
• A resident of Canada, Mexico, or South
Korea,
• A U.S. national (a citizen of American Sa-
moa, or a Northern Mariana Islander who
chose to become a U.S. national), or
• Eligible for the benefits of Article 21(2) of
the United States-India income tax treaty.
These additional amounts should be entered on
lines C and D, as appropriate.
As lines E, F, and G of the worksheet do not
apply to nonresident aliens subject to this proce-
dure, there should be no entries on those lines.
The nonresident alien student or grantee
may deduct away-from-home expenses (meals,
lodging, and transportation) on Form W-4 if he or
she expects to be away from his or her tax home
for 1 year or less. The amount of the claimed
expenses should be the anticipated actual
amount, if known.
The actual expenses or the per diem allow-
ance should be shown on line A of the work-
sheet in addition to the personal exemption
amount.
The student or grantee can claim other ex-
penses that will be deductible on Form 1040NR,
U.S. Nonresident Alien Income Tax Return.
These include student loan interest, certain
state and local income taxes, charitable contri-
butions, casualty losses, and moving expenses.
He or she should include these anticipated
amounts on line A of the worksheet.
The student or grantee can also enter on line
A of the worksheet, the part of the grant or
scholarship that is tax exempt under the statute
or a tax treaty.
Lines A through D of the Personal Al-
lowances Worksheet are added and the total
should be shown on line H.
The payer of the grant or scholarship must
review the Form W-4 to make sure all the neces-
sary and required information is provided. If the
withholding agent knows or has reason to know
that the amounts shown on the Form W-4 may
be false, the withholding agent must reject the
Form W-4 and withhold at the appropriate statu-
tory rate (14% or 30%). However, if the only
incorrect information is that the student or
grantee’s stay in the United States has extended
beyond 12 months, the withholding agent may
withhold under these rules, but without a deduc-
tion for away-from-home expenses.
After receipt and acceptance of the Form
W-4, the payer must withhold at the graduated
rates in Publication 15 (Circular E) as if the grant
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or scholarship income were wages. The gross
amount of the income is reduced by the total
amount of exemptions and deductions on the
Form W-4 and the withholding tax is figured on
the rest.
When completing Form 1042-S for the stu-
dent or grantee, enter the taxable part (gross
amount less qualified scholarship) of the schol-
arship or fellowship grant in box 2, enter the
withholding allowance amount from line H of the
Personal Allowances Worksheet of Form W-4 in
box 3, and show the net of these two amounts in
box 4.
Pay for services rendered. Pay for services
rendered as an employee by an alien who also is
the recipient of a scholarship or fellowship grant
usually is subject to graduated withholding ac-
cording to the rules discussed later in Wages
Paid to Employees — Graduated Withholding.
This includes taxable amounts an individual who
is a candidate for a degree receives for teaching,
doing research, and carrying out other part-time
employment required as a condition for receiv-
ing the scholarship or fellowship grant.
Grants given to students, trainees, or re-
searchers which require the performance of per-
sonal services as a necessary condition for
disbursing the grant do not qualify as scholar-
ship or fellowship grants. Instead, they are com-
pensation for personal services considered to
be wages. It does not matter what term is used
to describe the grant (for example, stipend,
scholarship, fellowship, etc.).
Withholding agents who pay grants
! that are in fact wages must report such
CAUTION
grants on Forms 941 and W-2 and
withhold income tax on them at the graduated
rates. Withholding agents may not allow tax
treaty exemptions that apply to scholarships and
fellowships to be applied to grants which are
really wages. It is the responsibility of the with-
holding agent to determine whether a grant is
“wages” or a “scholarship or fellowship,” and to
report and withhold on the grant accordingly. An
alien student, trainee, or researcher may not
claim a scholarship or fellowship treaty exemp-
tion against income which has been reported to
him on Form W-2 as wages.
Per diem paid by the U.S. Government. Per
diem for subsistence paid by the U.S. Govern-
ment (directly or by contract) to a nonresident
alien engaged in a training program in the United
States under the Mutual Security Act of 1954
(grants funded by the U.S. Agency for Interna-
tional Development) are not subject to 14% or
30% withholding. This is true even if the alien is
subject to income tax on those amounts.
Tax treaties. Many treaties contain exemp-
tions from U.S. taxation for scholarships and
fellowships. Although usually found in the stu-
dent articles of the tax treaties, many of these
exemptions also apply to research grants re-
ceived by researchers who are not students.
Table 2 of this publication shows a line entry
entitled “Scholarship or fellowship grant” for
those treaties which have such an exemption.
The treaty provision usually exempts the entire
scholarship or fellowship amount, regardless of
whether the grant is a “qualified scholarship”
under U.S. law.
An alien student, trainee, or researcher may
claim a treaty exemption for a scholarship or
Page 22
fellowship by submitting Form W-8BEN to the
payer of the grant. However, a scholarship or
fellowship recipient who receives both wages
and a scholarship or fellowship from the same
institution can claim treaty exemptions on both
kinds of income on Form 8233.
The scholarship or fellowship recipient who
is claiming a treaty exemption must provide you
with his or her TIN on Form W-8BEN or on Form
8233 or you cannot allow the treaty exemption.
A copy of a completed Form W-7, showing that a
TIN has been applied for, can be given to you
with a Form 8233. See Form 8233, later under
Pay for Personal Services Performed.
Nonresident alien who becomes a resident
alien. Generally, only a nonresident alien indi-
vidual may use the terms of a tax treaty to
reduce or eliminate U.S. tax on income from a
scholarship or fellowship grant. A student (in-
cluding a trainee or business apprentice) or re-
searcher who has become a resident alien for
U.S. tax purposes may be able to claim benefits
under a tax treaty that apply to reduce or elimi-
nate U.S. tax on scholarship or fellowship grant
income. Most treaties contain a provision known
as a “saving clause.” An exception to the saving
clause may permit an exemption from tax to
continue for scholarship or fellowship grant in-
come even after the recipient has otherwise
become a U.S. resident alien for tax purposes.
In this situation, the individual must give you a
Form W-9 and an attachment that includes all
the following information.
• The treaty country.
• The treaty article addressing the income.
• The article number (or location) in the tax
treaty that contains the saving clause and
its exceptions.
• The type and amount of income that quali-
fies for the exemption from tax.
• Sufficient facts to justify the exemption
from tax under the terms of the treaty arti-
cle.
Example. Article 20 of the U.S.-China in-
come tax treaty allows an exemption from tax for
scholarship income received by a Chinese stu-
dent temporarily present in the United States.
Under the Internal Revenue Code, a student
may become a resident alien for tax purposes if
his or her stay in the United States exceeds 5
calendar years. However, the treaty allows the
provisions of Article 20 to continue to apply even
after the Chinese student becomes a resident
alien of the United States.
Other Grants, Prizes, and Awards
Other grants, prizes, and awards made by grant-
ors which reside in the United States are treated
as income from sources within the United
States. Those made for activities conducted
outside the United States by a foreign person or
by grantors which reside outside the United
States are treated as income from foreign
sources. These provisions do not apply to sala-
ries or other pay for services.
Grant. The purpose of a grant must be to
achieve a specific objective, produce a report or
other similar product, or improve or enhance a
11:14 - 23-APR-2008
literary, artistic, musical, scientific, teaching, or
other similar capacity, skill, or talent of the
grantee. A grant must also be an amount which
does not qualify as a scholarship or fellowship.
The grantor must not intend the amount to be
given to the grantee for the purpose of aiding the
grantee to perform study, training, or research.
Prizes and awards. Prizes and awards are
amounts received primarily in recognition of re-
ligious, charitable, scientific, educational, artis-
tic, literary, or civic achievement, or are received
as the result of entering a contest. A prize or
award is taxable to the recipient unless all of the
following conditions are met:
• The recipient was selected without any ac-
tion on his or her part to enter the contest
or proceeding,
• The recipient is not required to render sub-
stantial future services as a condition to
receive the prize or award, and
• The prize or award is transferred by the
payer to a governmental unit or
tax-exempt charitable organization as des-
ignated by the recipient.
Targeted grants and achievement awards.
Targeted grants and achievement awards re-
ceived by nonresident aliens for activities con-
ducted outside the United States are treated as
income from foreign sources. Targeted grants
and achievement awards are issued by exempt
organizations or by the United States (or one of
its instruments or agencies), a state (or a politi-
cal subdivision of a state), or the District of
Columbia for an activity (or past activity in the
case of an achievement award) undertaken in
the public interest.
Pay for Personal
Services Performed
This section explains the rules for withholding
tax from pay for personal services. You gener-
ally must withhold tax at the 30% rate on com-
pensation you pay to a nonresident alien
individual for labor or personal services per-
formed in the United States, unless that pay is
specifically exempted from withholding or sub-
ject to graduated withholding. This rule applies
regardless of your place of residence, the place
where the contract for service was made, or the
place of payment.
Illegal aliens. Foreign workers who are illegal
aliens are subject to U.S. taxes in spite of their
illegal status. U.S. employers or payers who hire
illegal aliens may be subject to various fines,
penalties, and sanctions imposed by U.S. Immi-
gration and Customs Enforcement. If such em-
ployers or payers choose to hire illegal aliens,
the payments made to those aliens are subject
to the same tax withholding and reporting obli-
gations that apply to other classes of aliens.
Illegal aliens who are nonresident aliens and
who receive income from performing indepen-
dent personal services are subject to 30% with-
holding unless exempt under some provision of
law or a tax treaty. Illegal aliens who are resident
aliens and who receive income from performing
dependent personal services are subject to the
same reporting and withholding obligations
Publication 515 (April 2008)
Page 23 of 58 of Publication 515
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which apply to U.S. citizens who receive the
same kind of income.
Form 8233, Exemption From Withholding on
Compensation for Independent (and Certain
Dependent) Personal Services of a Nonresi-
dent Alien Individual. This form is used by a
nonresident alien individual to claim a tax treaty
exemption from withholding on some or all com-
pensation paid for:
• Independent personal services
(self-employment),
• Dependent personal services, or
• Personal services income and noncom-
pensatory scholarship or fellowship in-
come from the same withholding agent.
Persons providing independent personal
services can use Form 8233 to claim the per-
sonal exemption amount.
Form W-4, Employee’s Withholding Allow-
ance Certificate. This form is used by a per-
son providing dependent personal services to
claim the personal exemption amount, but not a
tax treaty exemption. Nonresident alien individu-
als are subject to special instructions for com-
pleting the Form W-4. See the discussion under
Wages Paid to Employees — Graduated With-
holding, later.
Pay for independent personal services (In-
come Code 16). Independent personal serv-
ices (a term commonly used in tax treaties) are
personal services performed by an independent
nonresident alien contractor as contrasted with
those performed by an employee. This category
of pay includes payments for professional serv-
ices, such as fees of an attorney, physician, or
accountant made directly to the person perform-
ing the services. It also includes honoraria paid
by colleges and universities to visiting teachers,
lecturers, and researchers.
Pay for independent personal services is
subject to NRA withholding and reporting as
follows.
30% rate. You must withhold at the statutory
rate of 30% on all payments unless the alien
enters into a withholding agreement or receives
a final payment exemption (discussed later).
The amount of pay subject to 30% withhold-
ing may be reduced by the personal exemption
amount ($3,500 for 2008) if the alien gives you a
properly completed Form 8233. A nonresident
alien is allowed only one personal exemption.
However, individuals who are residents of Can-
ada, Mexico, or South Korea, or are U.S. nation-
als are generally entitled to the same
exemptions as U.S. citizens.
Students and business apprentices covered
by Article 21(2) of the United States-India in-
come tax treaty may claim an additional exemp-
tion for their spouse if a joint return is not filed,
and if the spouse has no gross income for the
year and is not the dependent of another tax-
payer. They may also claim additional exemp-
tions for children who reside with them in the
United States at any time during the year, but
only if the dependents are U.S. citizens or na-
tionals or residents of the United States, Can-
ada, or Mexico. They may not claim exemptions
for dependents who are admitted to the United
States on “F-2,” “J-2,” or “M-2” visas unless such
dependents have become resident aliens.
Publication 515 (April 2008)
Each allowable exemption must be prorated
according to the number of days during the tax
year during which the alien performs services in
the United States. Multiply the number of these
days by $9.56 (the daily exemption amount for
2008) to figure the prorated amount. Residents
of South Korea must make a further proration of
their additional exemptions based on their gross
income effectively connected with a U.S. trade
or business. The rules for this proration are
discussed in detail in Publication 519.
A U.S. national is an individual who owes his
sole allegiance to the United States, but who is
not a U.S. citizen. Such an individual is usually a
citizen of American Samoa, or a Northern Mari-
ana Islander who chose to become a U.S. na-
tional.
Example 1. Hans Schmidt, who is a resi-
dent of Germany, worked (not as an employee)
for a U.S. company in the United States for 100
days during 2008 before returning to his country.
He earned $6,000 for the services performed
(not considered wages) in the United States.
Hans is married and has three dependent chil-
dren. His wife did not work and had no income
subject to U.S. tax. Hans is allowed $956 as a
deduction against the payments for his personal
services performed in the United States (100
days × $9.56). Tax must be withheld at 30% on
the rest of his earnings, $5,044 ($6,000 − $956).
Example 2. If, in Example 1, Hans were a
resident of Canada or Mexico or a national of the
United States, working under contract with a
domestic corporation, $4,780 (100 days × $9.56
per day for each of five exemptions) would be
allowed against the payments for personal serv-
ices performed in the United States. Tax must
be withheld at 30% on the rest of his earnings,
$1,220 ($6,000 − $4,780).
Withholding agreements. Pay for personal
services of a nonresident alien who is engaged
during the tax year in the conduct of a U.S. trade
or business may be wholly or partially exempted
from withholding at the statutory rate if an agree-
ment has been reached between the Commis-
sioner or his delegate and the alien as to the
amount of withholding required. This agreement
will be effective for payments covered by the
agreement that are made after the agreement is
executed by all parties. The alien must agree to
timely file an income tax return for the current tax
year.
Final payment exemption. The final pay-
ment of compensation for independent personal
services may be wholly or partially exempt from
withholding at the statutory rate. This exemption
applies to the last payment of compensation,
other than wages, for personal services ren-
dered in the United States that the alien expects
to receive from any withholding agent during the
tax year.
To obtain the final payment exemption, the
alien, or the alien’s agent, must file the forms
and provide the information required by the
Commissioner or his delegate. This information
includes, but is not limited to, the following items.
• A statement by each withholding agent
from whom amounts of gross income ef-
fectively connected with the conduct of a
U.S. trade or business have been received
by the alien during the tax year. It must
show the amount of income paid and the
11:14 - 23-APR-2008
amount of tax withheld. The withholding
agent must sign the statement and include
a declaration that it is made under penal-
ties of perjury.
• A statement by the withholding agent from
whom the final payment of compensation
for personal services will be received
showing the amount of final payment and
the amount that would be withheld if a final
payment exemption is not granted. The
withholding agent must sign the statement
and include a declaration that it is made
under penalties of perjury.
• A statement by the alien that he or she
does not intend to receive any other
amounts of gross income effectively con-
nected with the conduct of a U.S. trade or
business during the current tax year.
• The amount of tax that has been withheld
(or paid) under any other provision of the
Code or regulations for any income effec-
tively connected with the conduct of a U.S.
trade or business during the current tax
year.
• The amount of any outstanding tax liabili-
ties, including any interest and penalties,
from the current tax year or prior tax peri-
ods.
• The provision of any income tax treaty
under which a partial or complete exemp-
tion from withholding may be claimed, the
country of the alien’s residence, and a
statement of sufficient facts to justify an
exemption under that treaty.
The alien must give a statement, signed and
verified by a declaration that it is made under the
penalties of perjury, that all the information pro-
vided is true, and that to his or her knowledge no
relevant information has been omitted.
If satisfied with the information provided, the
Commissioner or his delegate will determine the
amount of the alien’s tentative income tax for the
tax year on gross income effectively connected
with the conduct of a U.S. trade or business.
Ordinary and necessary business expenses
may be taken into account if proved to the satis-
faction of the Commissioner or his delegate.
The Commissioner or his delegate will pro-
vide the alien with a letter to you, the withholding
agent, stating the amount of the final payment of
compensation for personal services that is ex-
empt from withholding, and the amount that
would otherwise be withheld that may be paid to
the alien due to the exemption. The amount of
pay exempt from withholding cannot be more
than $5,000. The alien must give two copies of
the letter to you and must also attach a copy of
the letter to his or her income tax return for the
tax year for which the exemption is effective.
Travel expenses. If you pay or reimburse
the travel expenses of a nonresident alien, the
payments are not reportable to the IRS and are
not subject to NRA withholding if the payments
are made under an accountable plan as de-
scribed in section 1.62-2 of the regulations. This
treatment applies only to that portion of a pay-
ment that represents the payment of travel and
lodging expenses and not to that portion that
represents compensation for independent per-
sonal services.
Page 23
Page 24 of 58 of Publication 515
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Tax treaties. Under many tax treaties, pay
for independent personal services performed in
the United States is treated as business income
and taxed according to the treaty provisions for
business profits.
Under some tax treaties, pay for indepen-
dent personal services performed in the United
States is exempt from U.S. income tax only if the
independent nonresident alien contractor per-
forms the services during a period of temporary
presence in the United States (usually not more
than 183 days) and is a resident of the treaty
country.
Independent nonresident alien contractors
use Form 8233 to claim an exemption from with-
holding under a tax treaty. For more information,
see Form 8233, earlier.
Often, you must withhold under the statutory
rules on payments made to a treaty country
resident contractor for services performed in the
United States. This is because the factors on
which the treaty exemption is based may not be
determinable until after the close of the tax year.
The contractor must then file a U.S. income tax
return (Form 1040NR) to recover any
overwithheld tax by providing the IRS with proof
that he or she is entitled to a treaty exemption.
Wages Paid to Employees —
Graduated Withholding
Salaries, wages, bonuses, or any other pay for
personal services (referred to collectively as
wages) paid to nonresident alien employees are
subject to graduated withholding in the same
way as for U.S. citizens and residents if the
wages are effectively connected with the con-
duct of a U.S. trade or business. Any wages paid
to a nonresident alien for personal services per-
formed as an employee for an employer are
generally exempt from the 30% withholding if
the wages are subject to graduated withholding.
Also exempt from the 30% withholding is pay
for personal services performed as an employee
for an employer if it is effectively connected with
the conduct of a U.S. trade or business and is
specifically excepted from wages. See Pay that
is not wages, later.
Employer-employee relationship. For pay
for personal services to qualify as wages, there
must be an employer-employee relationship.
Under the common law rules, every individ-
ual who performs services subject to the will and
control of an employer, both as to what shall be
done and how it shall be done, is an employee. It
does not matter that the employer allows the
employee considerable discretion and freedom
of action, as long as the employer has the legal
right to control both the method and the result of
the services.
If an employer-employee relationship exists,
it does not matter what the parties call the rela-
tionship. It does not matter if the employee is
called a partner, coadventurer, agent, or inde-
pendent contractor. It does not matter how the
pay is measured, how the individual is paid, or
what the payments are called. Nor does it matter
whether the individual works full-time or
part-time.
The existence of the employer-employee re-
lationship under the usual common law rules will
be determined, in doubtful cases, by an exami-
nation of the facts of each case.
Page 24
Employee. An employee generally includes
any individual who performs services if the rela-
tionship between the individual and the person
for whom the services are performed is the legal
relationship of employer and employee. This
includes an individual who receives a supple-
mental unemployment pay benefit that is treated
as wages.
No distinction is made between classes of
employees. Superintendents, managers, and
other supervisory personnel are employees.
Generally, an officer of a corporation is an em-
ployee, but a director acting in this capacity is
not. An officer who does not perform any serv-
ices, or only minor services, and neither re-
ceives nor is entitled to receive any pay is not
considered an employee.
Employer. An employer is any person or
organization for whom an individual performs or
has performed any service, of whatever nature,
as an employee. The term “employer” includes
not only individuals and organizations in a trade
or business, but organizations exempt from in-
come tax, such as religious and charitable orga-
nizations, educational institutions, clubs, social
organizations, and societies. It also includes the
governments of the United States, the states,
Puerto Rico, and the District of Columbia, as
well as their agencies, instrumentalities, and po-
litical subdivisions.
Two special definitions of employer that may
have considerable application to nonresident
aliens are:
• An employer includes any person paying
wages for a nonresident alien individual,
foreign partnership, or foreign corporation
not engaged in trade or business in the
United States (including Puerto Rico as if
a part of the United States), and
• An employer includes any person who has
control of the payment of wages for serv-
ices that are performed for another person
who does not have that control.
For example, if a trust pays wages, such as
certain types of pensions, supplemental unem-
ployment pay, or retired pay, and the person for
whom the services were performed has no legal
control over the payment of the wages, the trust
is the employer.
These special definitions have no effect
upon the relationship between an alien em-
ployee and the actual employer when determin-
ing whether the pay received is considered to be
wages.
If an employer-employee relationship exists,
the employer ordinarily must withhold the in-
come tax from wage payments by using the
percentage method or wage bracket tables as
shown in Publication 15 (Circular E).
Pay that is not wages. Employment for which
the pay is not considered wages (for graduated
income tax withholding) includes, but is not lim-
ited to, the following items.
• Agricultural labor if the total cash wages
paid to an individual worker during the
year is less than $150 and the total paid to
all workers during the year is less than
$2,500. But even if the total amount paid
to all workers is $2,500 or more, wages of
less than $150 per year paid to a worker
11:14 - 23-APR-2008
are not subject to income tax withholding if
certain conditions are met. For these con-
ditions, see Publication 51 (Circular A).
• Services of a household nature performed
in or about the private home of an em-
ployer, or in or about the clubrooms or
house of a local college club, fraternity, or
sorority. A local college club, fraternity, or
sorority does not include an alumni club or
chapter and may not be operated primarily
as a business enterprise. Examples of
these services include those performed as
a cook, janitor, housekeeper, governess,
gardener, or houseparent.
• Certain services performed outside the
course of the employer’s trade or business
for which cash payment is less than $50
for the calendar quarter.
• Services performed as an employee of a
foreign government, without regard to citi-
zenship, residence, or where services are
performed. These include services per-
formed by ambassadors, other diplomatic
and consular officers and employees, and
nondiplomatic representatives. They do
not include services for a U.S. or Puerto
Rican corporation owned by a foreign gov-
ernment.
• Services performed within or outside the
United States by an employee or officer
(regardless of citizenship or residence) of
an international organization designated
under the International Organizations Im-
munities Act.
• Services performed by a duly ordained,
commissioned, or licensed minister of a
church, but only if performed in the exer-
cise of the ministry and not as an em-
ployee of the United States, a U.S.
possession, or a foreign government, or
any of their political subdivisions. These
also include services performed by a
member of a religious order in carrying out
duties required by that order.
• Tips paid to an employee if they are paid
in any medium other than cash or, if in
cash, they amount to less than $20 in any
calendar month in the course of employ-
ment.
Services performed outside the United
States. Compensation paid to a nonresident
alien (other than a resident of Puerto Rico, dis-
cussed later) for services performed outside the
United States is not considered wages and is not
subject to withholding.
Withholding exemptions. The amount of
wages subject to graduated withholding may be
reduced by the personal exemption amount
($3,500 for 2008). The personal exemptions al-
lowed in figuring wages subject to graduated
withholding are the same as those discussed
earlier under Pay for independent personal serv-
ices, except that an employee must claim them
on Form W-4.
Special instructions for Form W-4. A non-
resident alien subject to wage withholding must
give the employer a completed Form W-4 to
enable the employer to figure how much income
tax to withhold.
Publication 515 (April 2008)
Page 25 of 58 of Publication 515
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A nonresident alien cannot claim ex-
! emption from withholding on Form
CAUTION
W-4. Use Form 8233 to claim a tax
treaty exemption from withholding. See Form
8233, earlier.
In completing Form W-4, nonresident aliens
should use the following instructions instead of
the instructions on Form W-4.
1. Check “Single” on line 3 (regardless of ac-
tual marital status).
2. Claim only one withholding allowance on
line 5, unless a resident of Canada, Mex-
ico, or South Korea, or a U.S. national.
3. Write “Nonresident Alien” or “NRA” above
the dotted line on line 6.
Nonresident alien employees are not
TIP required to request an additional with-
holding amount, but they can choose to
have an additional amount withheld on line 6.
Students and business apprentices from
India. Students and business apprentices who
are eligible for the benefits of Article 21(2) of the
United States-India income tax treaty can claim
additional withholding allowances on line 5 for
their spouses. In addition, they can claim an
additional withholding allowance for each de-
pendent who has become a resident alien.
Determining amount to withhold. Employ-
ers are required to add an amount to the wages
of a nonresident alien employee solely for the
purpose of calculating income tax withholding.
The specific amount depends on the payroll
period. This adjustment does not apply to stu-
dents and business apprentices from India. For
2008 this amount is:
Payroll period — Add
Weekly $ 51
Biweekly $ 102
Semimonthly $ 110
Monthly $ 221
Quarterly $ 663
Semiannually $ 1,325
Annually $ 2,650
Daily or $ 10.20
Miscellaneous (each
day of the payroll
period)
Do not include the additional amount
! on the employee’s Form W-2, Wage
CAUTION
and Tax Statement.
Reporting requirements for wages and with-
held taxes paid to nonresident aliens. The
employer must report the amount of wages and
deposits of withheld income and social security
and Medicare taxes by filing Form 941. House-
hold employers should see Publication 926,
Household Employer’s Tax Guide, for informa-
tion on reporting and paying employment taxes
on wages paid to household employees.
Publication 515 (April 2008)
Form W-2. The employer must also report
on Form W-2 the wages subject to NRA with-
holding and the withheld taxes. You must give
copies of this form to the employee. Wages
exempt from tax under a tax treaty are reported
on Form 1042-S and not in block 1 of Form W-2.
Wages exempt under a tax treaty may still be
reported in the state and local wages blocks of
Form W-2 if such wages are subject to state and
local taxation. For more information, see the
instructions for these forms.
Trust fund recovery penalty. If you are a
person responsible for withholding, accounting
for, or depositing or paying employment taxes,
and willfully fail to do so, you can be held liable
for a penalty equal to the full amount of the
unpaid trust fund tax, plus interest. A responsi-
ble person for this purpose can be an officer of a
corporation, a partner, a sole proprietor, or an
employee of any form of business. A trustee or
agent with authority over the funds of the busi-
ness can also be held responsible for the pen-
alty.
“Willfully” in this case means voluntarily, con-
sciously, and intentionally. You are acting will-
fully if you pay other expenses of the business
instead of the withholding taxes.
Federal unemployment tax (FUTA). The em-
ployer must pay FUTA and file Form 940 or
940-EZ, Employer’s Annual Federal Unemploy-
ment (FUTA) Tax Return. Only the employer
pays this tax; it is not deducted from the em-
ployee’s wages. In certain cases, wages paid to
students and railroad and agricultural workers
are exempt from FUTA tax. For more informa-
tion, see the instructions for these forms.
Wages paid to nonresident alien students,
teachers, researchers, trainees, and other non-
resident aliens in “F-1,” “J-1,” “M-1,” or “Q” non-
immigrant status are not subject to FUTA tax.
Pay for dependent personal services (In-
come Code 17). Dependent personal serv-
ices are personal services performed in the
United States by a nonresident alien individual
as an employee rather than as an independent
contractor.
Pay for dependent personal services is sub-
ject to NRA withholding and reporting as follows.
Graduated rates. Ordinarily, you must with-
hold on pay (wages) for dependent personal
services using graduated rates. The nonresi-
dent alien must complete Form W-4 as dis-
cussed earlier under Special instructions for
Form W-4, and you must report wages and in-
come tax withheld on Form W-2. However, you
do not have to withhold if any of the following
four exceptions applies.
Exception 1. Compensation paid for labor
or personal services performed in the United
States is deemed not to be income from sources
within the United States and is exempt from U.S.
income tax if:
1. The labor or services are performed by a
nonresident alien temporarily present in
the United States for a period or periods
not exceeding a total of 90 days during the
tax year,
2. The total pay does not exceed $3,000, and
11:14 - 23-APR-2008
3. The pay is for labor or services performed
as an employee of, or under a contract
with:
a. A nonresident alien individual, foreign
partnership, or foreign corporation that
is not engaged in a trade or business in
the United States, or
b. A U.S. citizen or resident alien individ-
ual, a domestic partnership, or a do-
mestic corporation, if the labor or
services are performed for an office or
place of business maintained in a for-
eign country or in a possession of the
United States by this individual, partner-
ship, or corporation.
If the total pay is more than $3,000, the entire
amount is income from sources in the United
States and is subject to U.S. tax.
Also, compensation paid for labor or services
performed in the United States by a nonresident
alien in connection with the individual’s tempo-
rary presence in the United States as a regular
member of the crew of a foreign vessel engaged
in transportation between the United States and
a foreign country or a U.S. possession is not
income from sources within the United States.
Exception 2. Compensation paid by a for-
eign employer to a nonresident alien for the
period the alien is temporarily present in the
United States on an “F,” “J,” or “Q” visa is ex-
empt from U.S. income tax. For this purpose, a
foreign employer means:
• A nonresident alien individual, foreign
partnership, or foreign corporation, or
• An office or place of business maintained
in a foreign country or in a U.S. posses-
sion by a domestic corporation, a domes-
tic partnership, or an individual U.S. citizen
or resident.
You can exempt the payment from withhold-
ing if you can reliably associate the payment
with a Form W-8BEN containing the taxpayer
identification number of the payee.
Exception 3. Compensation paid to certain
residents of Canada or Mexico who enter or
leave the United States at frequent intervals is
not subject to withholding. These aliens must
either:
• Perform duties in transportation services
(such as a railroad, bus, truck, ferry,
steamboat, aircraft, or other type) between
the United States and Canada or Mexico,
or
• Perform duties connected with an interna-
tional project, relating to the construction,
maintenance, or operation of a waterway,
viaduct, dam, or bridge crossed by, or
crossing, the boundary between the
United States and Canada or the bound-
ary between the United States and Mex-
ico.
To qualify for the exemption from withholding
during a tax year, a Canadian or Mexican resi-
dent must give the employer a statement with
name, address, and identification number, and
certifying that the resident:
• Is not a U.S. citizen or resident,
Page 25
Page 26 of 58 of Publication 515
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• Is a resident of Canada or Mexico, which-
ever applies, and
• Expects to perform the described duties
during the tax year in question.
The statement can be in any form, but it must
be dated and signed by the employee, and must
include a written declaration that it is made
under penalties of perjury.
Canadian and Mexican residents em-
ployed entirely within the United States.
Neither the transportation service exception nor
the international projects exception applies to
the pay of a resident of Canada or Mexico who is
employed entirely within the United States and
who commutes from a home in Canada or Mex-
ico to work in the United States. If an individual
works at a fixed point or points in the United
States (such as a factory, store, office, or desig-
nated area or areas), the wages for services
performed as an employee for an employer are
subject to graduated withholding.
Exception 4. Compensation paid for serv-
ices performed in Puerto Rico by a nonresident
alien who is a resident of Puerto Rico for an
employer (other than the United States or one of
its agencies) is not subject to withholding.
Compensation paid for either of the following
types of services is not subject to withholding if
the alien does not expect to be a resident of
Puerto Rico during the entire tax year.
• Services performed outside the United
States but not in Puerto Rico by a nonresi-
dent alien who is a resident of Puerto Rico
for an employer other than the United
States or one of its agencies, or
• Services performed outside the United
States by a nonresident alien who is a
resident of Puerto Rico, as an employee of
the United States or any of its agencies.
To qualify for the exemption from withholding
for any tax year, the employee must give the
employer a statement showing the employee’s
name and address and certifying that the em-
ployee:
• Is not a citizen or resident of the United
States, and
• Is a resident of Puerto Rico who does not
expect to be a resident for that entire tax
year.
The statement must be signed and dated by the
employee and contain a written declaration that
it is made under penalties of perjury.
Tax treaties. Pay for dependent personal
services under some tax treaties is exempt from
U.S. income tax only if both the employer and
the employee are treaty country residents and
the nonresident alien employee performs the
services while temporarily living in the United
States (usually for not more than 183 days).
Other treaties provide for exemption from U.S.
tax on pay for dependent personal services if the
employer is any foreign resident and the em-
ployee is a treaty country resident and the non-
resident alien employee performs the services
while temporarily in the United States.
Pay for teaching (Income Code 18). This
category is given a separate income code num-
ber because some tax treaties provide at least
Page 26
partial exemption from withholding and from
U.S. tax. Pay for teaching means payments to a
nonresident alien professor, teacher, or re-
searcher by a U.S. university or other accredited
educational institution for teaching or research
work at the institution.
Graduated rates. Graduated withholding of
income tax usually applies to all wages, salaries,
and other pay for teaching and research paid by
a U.S. educational institution during the period
the nonresident alien is teaching or performing
research at the institution.
A nonresident alien temporarily in the United
States on an “F-1,” “J-1,” “M-1,” or “Q-1” visa is
not subject to social security and Medicare taxes
on pay for services performed to carry out the
purpose for which the alien was admitted to the
United States. Social security and Medicare
taxes should not be withheld or paid on this
amount. However, if an alien is considered a
resident alien, as discussed earlier, that pay is
subject to social security and Medicare taxes
even though the alien is still in one of the nonim-
migrant statuses mentioned above. This rule
also applies to FUTA (unemployment) taxes
paid by the employer. Teachers, researchers,
and other employees temporarily present in the
United States on other nonimmigrant visas or in
refugee, or asylee immigration status are fully
liable for social security and Medicare taxes
unless an exemption applies from one of the
totalization agreements in force between the
United States and several other nations.
The Social Security Administration
publishes the complete texts and ex-
planatory pamphlets of the totalization
agreements which are available by calling
1-800-772-1213 or by visiting the Social Secur-
ity Administration web site at: www.social-
security.gov/international.
Tax treaties. Under most tax treaties, pay
for teaching or research is exempt from U.S.
income tax and from withholding for a specified
period of time when paid to a professor, teacher,
or researcher, who was a resident of the treaty
country immediately prior to entry into the United
States and who is not a citizen of the United
States (see Table 2). The U.S. educational insti-
tution paying the compensation must report the
amount of compensation paid each year which
is exempt from tax under a tax treaty on Form
1042-S. The employer should also report the
compensation in the state and local wages
blocks of Form W-2 if the wages are subject to
state and local taxes, or in the social security
and Medicare wages blocks of Form W-2 if the
wages are subject to social security and Medi-
care taxes.
Claimants must give you either Form
W-8BEN or 8233, as applicable, to obtain these
treaty benefits.
Pay during studying and training (Income
Code 19). This category refers to pay (as
contrasted with remittances, allowances, or
other forms of scholarships or fellowship
grants — see Scholarships and Fellowship
Grants, earlier) for personal services performed
while a nonresident alien is temporarily in the
United States as a student, trainee, or appren-
tice, or while acquiring technical, professional,
or business experience.
11:14 - 23-APR-2008
Graduated rates. Wages, salaries, or other
compensation paid to a nonresident alien stu-
dent, trainee, or apprentice for labor or personal
services performed in the United States are sub-
ject to graduated withholding.
A nonresident alien temporarily in the United
States on an “F-1,” “J-1,” “M-1,” or “Q-1” visa is
not subject to social security and Medicare taxes
on pay for services performed to carry out the
purpose for which the alien was admitted to the
United States. Social security and Medicare
taxes should not be withheld or paid on this
amount. This exemption from social security and
Medicare taxes also applies to employment per-
formed under Curricular Practical Training and
Optional Practical Training, on or off campus, by
foreign students in “F-1,” “J-1,” “M-1,” or “Q”
status as long as the employment is authorized
by the U.S. Citizenship and Immigration Serv-
ices. However, if an alien is considered a resi-
dent alien, as discussed earlier, that pay is
subject to social security and Medicare taxes
even though the alien is still in one of the nonim-
migrant statuses mentioned above. This rule
also applies to FUTA (unemployment) taxes
paid by the employer.
Any student who is enrolled and regularly
attending classes at a school may be exempt
from social security, Medicare, and FUTA taxes
on pay for services performed for that school.
See Publication 15 (Circular E).
Tax treaties. Many tax treaties provide an
exemption from U.S. income tax and from with-
holding on compensation paid to nonresident
alien students or trainees during training in the
United States for a limited period. In addition,
some treaties provide an exemption from tax
and withholding for compensation paid by the
U.S. Government or its contractor to a nonresi-
dent alien student or trainee who is temporarily
present in the United States as a participant in a
program sponsored by the U.S. Government
(see Table 2). However, a withholding agent
who is a U.S. resident, a U.S. Government
agency, or its contractor must report the amount
of pay on Form 1042-S.
Claimants must give you either Form
W-8BEN or 8233, as applicable, to obtain these
treaty benefits.
Artists and Athletes
(Income Code 20)
Because many tax treaties contain a provision
for pay to artists and athletes, a separate cate-
gory is assigned these payments for withholding
purposes. This category includes payments
made for performances by public entertainers
(such as theater, motion picture, radio, or televi-
sion artists, or musicians) or athletes.
Withholding rate. You must withhold tax at a
30% rate on payments to artists and athletes for
services performed as independent contractors.
See Pay for independent personal services, ear-
lier, for more information. You must withhold tax
at graduated rates on payments to artists and
athletes for services performed as employees.
See Pay for dependent personal services, ear-
lier, for more information. However, in any situa-
tion where the nature of the relationship
between the payer of the income and the artist
or athlete is not ascertainable, you should with-
hold at a rate of 30%.
Publication 515 (April 2008)
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Central withholding agreements. Nonres-
ident alien entertainers or athletes performing or
participating in athletic events in the United
States may be able to enter into a withholding
agreement with the IRS for reduced withholding
provided certain requirements are met. Under
no circumstances will a withholding agreement
reduce taxes withheld to less than the alien’s
anticipated income tax liability.
Nonresident alien entertainers or athletes re-
questing a central withholding agreement must
provide the following information.
1. A list of the names and addresses of the
nonresident aliens to be covered by the
agreement.
2. Copies of all contracts that the aliens or
their agents and representatives have en-
tered into regarding the time period and
performances or events to be covered by
the agreement including, but not limited to,
contracts with:
a. Employers, agents, and promoters,
b. Exhibition halls,
c. Persons providing lodging, transporta-
tion, and advertising, and
d. Accompanying personnel, such as band
members or trainers.
3. An itinerary of dates and locations of all
events or performances scheduled during
the period to be covered by the agree-
ment.
4. A proposed budget containing itemized es-
timates of all gross income and expenses
for the period covered by the agreement,
including any documents to support these
estimates.
5. The name, address, and telephone num-
ber of the person the IRS should contact if
additional information or documentation is
needed.
6. The name, address, and employer identifi-
cation number of the agent or agents who
will be the central withholding agents for
the aliens and who will enter into a con-
tract with the IRS. A central withholding
agent ordinarily receives contract pay-
ments, keeps books of account for the
aliens covered by the agreement, and
pays expenses (including tax liabilities) for
the aliens during the period covered by the
agreement.
When the IRS approves the request, the
Associate Chief Counsel (International) will pre-
pare a withholding agreement. The agreement
must be signed by each withholding agent, each
nonresident alien covered by the agreement,
and the Commissioner or his delegate.
Generally, each withholding agent must
agree to withhold income tax from payments
made to the nonresident alien; to pay over the
withheld tax to the U.S. Treasury on the dates
and in the amounts specified in the agreement;
and to have the IRS apply the payments of
withheld tax to the withholding agent’s Form
1042 account. Each withholding agent will have
to file Form 1042 and Form 1042-S for each tax
year in which income is paid to a nonresident
alien covered by the withholding agreement.
Publication 515 (April 2008)
The IRS will credit the withheld tax payments,
posted to the withholding agent’s Form 1042
account, in accordance with the Form 1042-S.
Each nonresident alien covered by the withhold-
ing agreement must agree to file Form 1040NR
or, if he or she qualifies, Form 1040NR-EZ.
A request for a central withholding
agreement should be sent to the fol-
lowing address at least 90 days before
the agreement is to take effect:
Central Withholding Agreement Program
Internal Revenue Service
SE:S:C:CP:IIC MS 0175
1220 SW 3rd Ave.
Portland, OR 97204
Tax treaties. Under many tax treaties, com-
pensation paid to public entertainers or athletes
for services performed in the United States is
exempt from U.S. income tax only when the
alien is present for a limited period of time and
the pay is within limits provided in the tax treaty
(see Table 2).
Employees and independent contractors
may claim an exemption from withholding under
a tax treaty by filing Form 8233. Often, however,
you will have to withhold at the statutory rates on
the total payments to the entertainer or athlete.
This is because the exemption may be based
upon factors that cannot be determined until
after the end of the year.
Other Income
For the discussion of Income Codes 24, 25, and
26, see U.S. Real Property Interest, later. For
the discussion of Income Code 27, see Publicly
Traded Partnerships, later.
Gambling winnings (Income Code 28). In
general, nonresident aliens are subject to NRA
withholding at 30% on the gross proceeds from
gambling won in the United States if that income
is not effectively connected with a U.S. trade or
business and is not exempted by treaty. The tax
withheld and winnings are reportable on Forms
1042 and 1042-S.
No tax is imposed on nonbusiness gambling
income a nonresident alien wins playing black-
jack, baccarat, craps, roulette, or big-6 wheel in
the United States. A Form W-8BEN is not re-
quired to obtain the exemption from withholding,
but a Form W-8BEN may be required for pur-
poses of Form 1099 reporting and backup with-
holding. Gambling income that is not subject to
NRA withholding is not subject to reporting on
Form 1042-S.
Nonresident aliens are taxed at graduated
rates on net gambling income won in the U.S.
that is effectively connected with a U.S. trade or
business.
Tax treaties. Gambling income of residents
(as defined by treaty) of the following foreign
countries is not taxable by the United States:
Austria, Belgium, Czech Republic, Denmark,
Finland, France, Germany, Hungary, Ireland, It-
aly, Japan, Latvia, Lithuania, Luxembourg,
Netherlands, Russian Federation, Slovak Re-
public, Slovenia, South Africa, Spain, Sweden,
Tunisia, Turkey, Ukraine, and the United King-
dom.
Claimants must give you a Form W-8BEN
(with a TIN) to claim treaty benefits on gambling
income that is not effectively connected with a
11:14 - 23-APR-2008
U.S. trade or business. See U.S. Taxpayer Iden-
tification Numbers, later, for when you can ac-
cept a Form W-8BEN without a TIN.
Transportation income. U.S. source gross
transportation income is generally not subject to
NRA withholding.
Transportation income is income from the
use of a vessel or aircraft, whether owned, hired,
or leased, or from the performance of services
directly related to the use of a vessel or aircraft.
U.S. source gross transportation income in-
cludes 50% of all transportation income from
transportation that either begins or ends in the
United States. For personal service income
other than income derived from, or in connection
with, a vessel, the use must be between the
United States and a U.S. possession.
The recipient of U.S. source gross transpor-
tation income must pay tax at the rate of 4%
unless the income is effectively connected with
the conduct of a U.S. trade or business. If the
income is effectively connected with a U.S. trade
or business, it is taxed on a net basis at a
graduated rate of tax.
Other income (Income Code 50). Use this
category to report U.S. source FDAP income
that is not reportable under any of the other
income categories. Examples of income that
may be reportable under this category are com-
missions, insurance proceeds, patronage distri-
butions, prizes, and racing purses.
As discussed earlier under Income Subject
to NRA Withholding, every kind of FDAP income
from U.S. sources that is not effectively con-
nected with a U.S. trade or business is subject to
NRA withholding unless the income is specifi-
cally exempt under the Code or a tax treaty. You
generally must withhold at the 30% rate on this
income.
Foreign Governments
and Certain Other
Foreign Organizations
Investment income earned by a foreign govern-
ment is not included in the gross income of the
foreign government and is not subject to U.S.
withholding tax. Investment income means in-
come from investments in the United States in
stocks, bonds, or other domestic securities, fi-
nancial instruments held in the execution of gov-
ernmental financial or monetary policy, and
interest on money deposited by a foreign gov-
ernment in banks in the United States. A foreign
government must provide a Form W-8EXP or, in
the case of a payment made outside the United
States to an offshore account, documentary evi-
dence to obtain this exemption. Investment in-
come paid to a foreign government is subject to
reporting on Form 1042-S.
The following types of income received by a
foreign government are subject to NRA with-
holding.
1. Income (including investment income) re-
ceived from the conduct of a commercial
activity or from sources other than those
stated above.
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2. Income received from a controlled commer-
cial entity (including gain from the disposi-
tion of any interest in a controlled
commercial entity) and income received by
a controlled commercial entity.
If the foreign government is a partner in a
partnership carrying on a trade or business
in the United States, the effectively con-
nected income allocable to the foreign gov-
ernment is considered derived from a
controlled commercial activity and is subject
to withholding under section 1446.
3. Gain derived from the disposition of a U.S.
real property interest. Withholding on these
gains is discussed later under U.S. Real
Property Interest.
A government of a U.S. possession is ex-
empt from U.S. tax on all U.S. source income.
This income is not subject to NRA withholding.
These governments should use Form W-8EXP
to get this exemption.
International organizations. International or-
ganizations are exempt from U.S. tax on all U.S.
source income. This income is not subject to
withholding. International organizations are not
required to provide a Form W-8 or documentary
evidence to receive the exemption if the name of
the payee is one that is designated as an inter-
national organization by executive order.
Foreign tax-exempt organizations. A for-
eign organization that is a tax exempt organiza-
tion under section 501(c) of the Internal
Revenue Code is not subject to a withholding tax
on amounts that are not income includible under
section 512 of the Internal Revenue Code as
unrelated business taxable income. However, if
a foreign organization is a foreign private foun-
dation, it is subject to a 4% withholding tax on all
U.S. source investment income. For a foreign
tax-exempt organization to claim an exemption
from withholding because of its tax exempt sta-
tus under section 501(c), or to claim withholding
at a 4% rate, it must provide you with a Form
W-8EXP. However, if a foreign organization is
claiming an exemption from withholding under
an income tax treaty, or the income is unrelated
business taxable income, the organization must
provide a Form W-8BEN or W-8ECI. Income
paid to foreign tax-exempt organizations is sub-
ject to reporting on Form 1042-S. If the organiza-
tion is a partner in a partnership carrying on a
trade or business in the United States, the effec-
tively connected income allocable to the organi-
zation is subject to withholding under section
1446.
U.S. Taxpayer
Identification Numbers
As the withholding agent, you must generally
request that the payee provide you with its U.S.
taxpayer identification number (TIN). You must
include the payee’s TIN on forms, statements,
and other tax documents. The payee’s TIN may
be any of the following.
• An individual may have a social security
number (SSN). If the individual does not
have, and is eligible for, an SSN, he or
she must use Form SS-5 to get an SSN.
Page 28
The Social Security Administration will tell
the individual if he or she is eligible to get
an SSN.
• An individual may have an IRS individual
taxpayer identification number (ITIN). If
the individual does not have, and is not
eligible for, an SSN, he or she must apply
for an ITIN by using Form W-7.
• Any person other than an individual, and
any individual who is an employer or who
is engaged in a U.S. trade or business as
a sole proprietor, must have an employer
identification number (EIN). Use Form
SS-4 to get an EIN.
A TIN must be on a withholding certificate if
the beneficial owner is claiming any of the fol-
lowing.
• Tax treaty benefits (see Exceptions to TIN
requirement, later).
• Income is effectively connected with a
U.S. trade or business.
• Exemption for certain annuities (see Pen-
sions, Annuities, and Alimony, earlier).
• Exemption based on exempt organization
or private foundation status.
In addition, a TIN must be on a withholding
certificate from a person claiming to be any of
the following.
• Qualified intermediary.
• Withholding foreign partnership.
• Withholding foreign trust.
• Exempt organization.
• U.S. branch of a foreign person treated as
a U.S. person (see section
1.1441-1(b)(2)(iv) of the regulations).
• U.S. person.
Exceptions to TIN requirement. A foreign
person does not have to provide a U.S. TIN to
claim a reduced rate of withholding under a tax
treaty if the requirements for the following ex-
ceptions are met.
• Income from marketable securities (dis-
cussed earlier under Form W-8BEN).
• Unexpected payment to an individual (dis-
cussed next).
Unexpected payment. A Form W-8BEN or
a Form 8233 provided by a nonresident alien to
get treaty benefits does not need a U.S. TIN if
you, the withholding agent, meet all the following
requirements.
• You are an acceptance agent.
• You can request an ITIN for a payee on an
expedited basis.
• You are required to make an unexpected
payment to the nonresident alien.
• You cannot get the ITIN because the IRS
is not issuing ITINs at the time you make
the payment or at any earlier time after
you know you have to make the payment.
• You cannot reasonably delay making the
unexpected payment.
11:14 - 23-APR-2008
• You submit a completed Form W-7 for the
payee, with a certification that you have
reviewed the required documentation and
have no actual knowledge or reason to
know that the documentation is not com-
plete or accurate, to the IRS during the
first business day after you made the pay-
ment.
An acceptance agent is a person who, under a
written agreement with the IRS, is authorized to
assist alien individuals and other foreign per-
sons get ITINs or EINs. For information on the
application procedures for becoming an accept-
ance agent, see Revenue Procedure 2006-10
on page 293 of Internal Revenue Bulletin 2006-2
at www.irs.gov/pub/irs-irbs/irb06-02.pdf.
A payment is unexpected if you or the benefi-
cial owner could not have reasonably antici-
pated the payment during a time when an ITIN
could be obtained. This could be due to the
nature of the payment or the circumstances in
which the payment is made. A payment is not
considered unexpected solely because the
amount of the payment is not fixed.
Example. Mary, a citizen and resident of
Ireland, visits the United States and wins $5,000
playing a slot machine in a casino. Under the
treaty with Ireland, the winnings are not subject
to U.S. tax. Mary claims the treaty benefits by
providing a Form W-8BEN to the casino upon
winning at the slot machine. However, she does
not have an ITIN. The casino is an acceptance
agent that can request an ITIN on an expedited
basis.
Situation 1. Assume that Mary won the
money on Sunday. Since the IRS does not issue
ITINs on Sunday, the casino can pay $5,000 to
Mary without withholding U.S. tax. The casino
must, on the following Monday, fax a completed
Form W-7 for Mary, including the required certifi-
cation, to the IRS for an expedited ITIN.
Situation 2. Assume that Mary won the
money on Monday. To pay the winnings without
withholding U.S. tax, the casino must apply for
and get an ITIN for Mary because an expedited
ITIN is available from the IRS at the time of the
payment.
Depositing
Withheld Taxes
This section discusses the rules for depositing
income tax withheld on FDAP income. The de-
posit rules discussed here do not apply to the
following items.
• Taxes on pay subject to graduated with-
holding as discussed earlier. (See Form
941 for the deposit rules.)
• Tax withheld on pensions and annuities
subject to graduated withholding or the
10% tax on nonperiodic distributions. (See
Form 945 for the deposit rules.)
• Tax withheld on a foreign partner’s share
of effectively connected income of a part-
nership. See Partnership Withholding on
Effectively Connected Income, later.
Publication 515 (April 2008)
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• Tax withheld on dispositions of U.S. real
property interests by foreign persons. See
U.S. Real Property Interest, later.
• Taxes on household employee. See
Schedule H (Form 1040), Household Em-
ployment Taxes, to report social security
and Medicare taxes, and any income tax
withheld, on wages paid to a nonresident
alien household employee.
When Deposits
Are Required
A deposit required for any period occurring in
one calendar year must be made separately
from a deposit for any period occurring in an-
other calendar year. A deposit of this tax must
be made separately from a deposit of any other
type of tax.
The amount of tax you are required to with-
hold determines the frequency of your deposits.
The following rules show how often deposits
must be made.
1. If at the end of a calendar year the total
amount of undeposited taxes is less than
$200, you may either pay the taxes with
your Form 1042 or deposit the entire
amount by the due date of your Form
1042.
2. If at the end of any month the total amount
of undeposited taxes is $200 or more but
less than $2,000, you must deposit the
taxes within 15 days after the end of the
month. If you made a deposit of $2,000 or
more during the month (except December)
under rule 3 below, carry over any end of
the month balance of less than $2,000 to
the next month. If you made a deposit of
$2,000 or more during December, any end
of December balance of less than $2,000
should be remitted with your Form 1042 by
the due date.
3. If at the end of any quarter-monthly period
the total amount of undeposited taxes is
$2,000 or more, you must deposit the
taxes within 3 banking days after the end
of the quarter-monthly period. (A quar-
ter-monthly period ends on the 7th, 15th,
22nd, and last day of the month.) In figur-
ing banking days, exclude any local holi-
days observed by authorized financial
institutions, as well as Saturdays, Sun-
days, and legal holidays.
You are considered to meet the deposit re-
quirements in (3) if:
• You deposit at least 90% of the actual tax
liability for the deposit period, and
• You deposit any underpayment with the
first deposit that you must make after the
15th day of the following month, if the
quarter-monthly period is in a month other
than December. You must deposit any un-
derpayment of $200 or more for a quar-
ter-monthly period that occurs during
December by January 31.
Electronic deposit requirement. You must
use the Electronic Federal Tax Payment System
Publication 515 (April 2008)
(EFTPS) to make electronic deposits of all de-
pository tax liabilities you incur after 2007, if you
meet either of the following conditions.
• You had to make electronic deposits in
2007.
• You deposited more than $200,000 in fed-
eral depository taxes in 2006.
If you do not meet these conditions, you may
choose to make electronic deposits.
To participate in EFTPS, you must first enroll.
To receive an enrollment form, call
1-800-316-6541 (individual), 1-800-555-4477
(business), or you can enroll online at
www.eftps.gov. Get Publication 966, The Se-
cure Way to Pay Your Federal Taxes, for more
information.
Qualified business taxpayers that re-
TIP quest an EIN will automatically be en-
rolled in EFTPS. They will receive
information on how to activate their account or
get federal deposit coupons, discussed next.
Federal tax deposit coupons. If you do not
make electronic deposits, you must deposit the
income tax withheld on fixed or determinable
annual or periodic income using Form 8109,
Federal Tax Deposit Coupon, according to the
instructions provided with the form. If you do not
have your coupons when a deposit is due, call
1-800-829-4933 or contact your local IRS office.
To eliminate any penalty for failure to make
deposits on time, be prepared to show that the
deposit was mailed by the second day before
the due date.
If you prefer, you may mail your coupon and
payment to:
Financial Agent
Federal Tax Deposit Processing
P.O. Box 970030
St. Louis, MO 63197
U.S.A.
Make your check or money order payable to
“Financial Agent.”
Note. The “Amount of Deposit” on the form
should be stated in U.S. dollars and all pay-
ments should be made in U.S. dollars.
Obtaining coupon book. A preinscribed
book of Federal Tax Deposit Coupons (Form
8109) automatically will be sent to you after you
apply for an employer identification number
(EIN). Apply by completing Form SS-4, available
from the IRS. If you have not received the cou-
pon book, call 1-800-829-4933.
If you are a qualified business tax-
! payer, you will automatically be en-
CAUTION
rolled in EFTPS (discussed earlier)
when you apply for your EIN. You will receive
information on how to get your coupons.
Record of deposit. Before making a
deposit, enter the amount of payment
RECORDS
on the coupon and in your records. The
coupon will not be returned to you, but will be
used to credit your tax account as identified by
your employer identification number.
Penalty for failure to make deposits on time.
If you fail to make a required deposit within the
time prescribed, a penalty is imposed on the
11:14 - 23-APR-2008
underpayment (the excess of the required de-
posit over any actual timely deposit for a period).
You can avoid the penalty if you can show that
the failure to deposit was for reasonable cause
and not because of willful neglect. Also, the IRS
may waive the penalty if certain requirements
are met.
Penalty rate. If the deposit is:
• 1 to 5 days late, the penalty is 2% of the
underpayment,
• 6 to 15 days late, the penalty is 5%, or
• 16 or more days late, the penalty is 10%.
However, if the deposit is not made within 10
days after the IRS issues the first notice de-
manding payment, the penalty is 15%.
If you owe a penalty for failing to deposit tax
for more than one deposit period, and you make
a deposit, your deposit is applied to the most
recent period to which the deposit relates unless
you designate the deposit period or periods to
which your deposit is to be applied. You can
make this designation only during a 90 day pe-
riod that begins on the date of the penalty notice.
The notice contains instructions on how to make
this designation.
Adjustment for
Overwithholding
What to do if you overwithheld tax depends on
when you discover the overwithholding.
Overwithholding discovered by March 15 of
following calendar year. If you discover that
you overwithheld tax by March 15 of the follow-
ing calendar year, you may use the undeposited
amount of tax to make any necessary adjust-
ments between you and the recipient of the
income. However, if the undeposited amount is
not enough to make any adjustments, or if you
discover the overwithholding after the entire
amount of tax has been deposited, you can use
either the reimbursement or the set-off proce-
dure to adjust the overwithholding.
If March 15 is a Saturday, Sunday, or
TIP legal holiday, the next business day is
the final date for these actions.
Reimbursement procedure. Under the re-
imbursement procedure, you repay the benefi-
cial owner or payee the amount overwithheld.
You use your own funds for this repayment. You
must make the repayment by March 15 of the
year after the calendar year in which the amount
was overwithheld. For example, if you
overwithheld tax in 2008 you must repay the
beneficial owner by March 16, 2009. You must
keep a receipt showing the date and amount of
the repayment and provide a copy of the receipt
to the beneficial owner.
You may reimburse yourself by reducing any
subsequent deposits you make before the end
of the year after the calendar year in which the
amount was overwithheld. The reduction cannot
be more than the amount you actually repaid.
If you will reduce a deposit due in that later
year, you must show the total tax withheld and
the amount actually repaid on a timely filed (not
including extensions) Form 1042-S for the cal-
endar year in which the amount was
overwithheld. You must state on a timely filed
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(not including extensions) Form 1042 that you
are claiming a credit.
Example. James Smith is a resident of the
United Kingdom. In December 2008, domestic
corporation M paid a dividend of $100 to James,
at which time M Corporation withheld $30 and
paid the balance of $70 to him. In February
2009, James gave M Corporation a valid Form
W-8BEN. He advises M Corporation that under
the income tax convention with the United King-
dom, only $15 tax should have been withheld
from the dividend and requests repayment of the
$15 overwithheld. Although M Corporation had
already deposited the $30, the corporation re-
paid James $15 before the end of February.
During 2008, M Corporation made no other
payments from which tax had to be withheld. On
its timely filed 2008 Form 1042, M Corporation
reports $15 as its total tax liability and $30 as its
total deposits. M Corporation requests that the
$15 overpayment be credited to its 2009 Form
1042 rather than refunded.
The Form 1042-S that M Corporation files for
the dividend paid to James in 2008 must show a
tax withheld of $30 in boxes 7 and 9 and $15 as
an amount repaid in box 10.
In June 2009, M Corporation made pay-
ments from which it withheld tax of $200. On
July 16, 2009, M Corporation deposited $185,
that is, $200 less the $15 credit claimed on its
Form 1042 for 2008. M Corporation timely filed
its Form 1042 for 2009, showing tax liability of
$200, $185 deposited, and $15 credit from
2008.
Set-off procedure. Under the set-off proce-
dure, you repay the beneficial owner or payee
the amount overwithheld by reducing the
amount you would have been required to with-
hold on later payments you make to that person.
These later payments must be made before the
earlier of:
• The date you actually file Form 1042-S for
the calendar year in which the amount
was overwithheld, or
• March 15 of the year after the calendar
year in which the amount was
overwithheld.
On Form 1042 and Form 1042-S for the calen-
dar year in which the amount was overwithheld,
show the reduced amount as the amount re-
quired to be withheld.
Overwithholding discovered at a later date.
If you discover after March 15 of the following
calendar year that you overwithheld tax for the
prior year, do not adjust the amount of tax re-
ported on Forms 1042-S (and Form 1042) or on
any deposit or payment for that prior year. Do
not repay the beneficial owner or payee the
amount overwithheld.
In this situation, the recipient will have to file
a U.S. income tax return (Form 1040NR or Form
1040NR-EZ or Form 1120-F) or, if a tax return
has already been filed, a claim for refund (Form
1040X or amended Form 1120-F) to recover the
amount overwithheld.
Page 30
Returns Required
Every withholding agent, whether U.S. or for-
eign, must file Forms 1042 and 1042-S to report
payments of amounts subject to NRA withhold-
ing unless an exception applies. Do not use
Forms 1042 and 1042-S to report tax withheld
on the following:
• Wages, salaries, or other compensation
reported on Form W-2 (see Wages Paid to
Employees — Graduated Withholding, ear-
lier under Pay for Personal Services Per-
formed),
• Any portion of a U.S. or foreign partner-
ship’s (other than a publicly traded part-
nership) effectively connected taxable
income allocable to a foreign partner (see
Partnership Withholding on Effectively
Connected Income, later),
• Dispositions of U.S. real property interests
by foreign persons (see U.S. Real Prop-
erty Interest, later),
• Pensions, annuities, and certain other de-
ferred income reported on Form 1099, and
• Income, social security, and Medicare
taxes on wages paid to a household em-
ployee reported on Schedule H (Form
1040).
The Forms 1042 and 1042-S must be
DUE filed by March 15 of the year following
the calendar year in which the income
subject to reporting was paid. If March 15 falls
on a Saturday, Sunday, or legal holiday, the due
date is the next business day.
Form 1042. Every U.S. and foreign withhold-
ing agent that is required to file a Form 1042-S
must also file an annual return on Form 1042.
You must file Form 1042 even if you were not
required to withhold any income tax.
You must file Form 1042 with the:
Ogden Service Center
P.O. Box 409101
Ogden, UT 84409
Form 1042-S. Every U.S. and foreign with-
holding agent must file a Form 1042-S for
amounts subject to NRA withholding unless an
exception applies. The form can be filed elec-
tronically or on paper. A separate Form 1042-S
is required for each recipient of income to whom
you made payments during the preceding calen-
dar year regardless of whether you withheld or
were required to withhold tax. You must use a
separate Form 1042-S for each type of income
that you paid to the same recipient. See State-
ments to recipients, later.
You must furnish a Form 1042-S for each
recipient even if you did not withhold tax be-
cause you repaid the tax withheld to the recipi-
ent or because the income payment was exempt
from tax under the Internal Revenue Code or
under a U.S. income tax treaty.
You must get prior annual approval to use a
substitute Form 1042-S unless it meets the re-
quirements listed in Publication 1179, General
Rules and Specifications for Substitute Forms
11:14 - 23-APR-2008
1096, 1098, 1099, 5498, W-2G, and 1042-S.
Get Publication 1179 for more information.
Joint owners. If all the owners provide doc-
umentation that permits them to receive the
same reduced rate of withholding (for example,
under an income tax treaty) you should apply the
reduced rate of withholding. You are required,
however, to report the payment on one Form
1042-S to the person whose status you rely
upon to determine the withholding rate. If, how-
ever, any one of the owners requests its own
Form 1042-S, you must furnish Form 1042-S to
the person who requests it. If more than one
Form 1042-S is issued for a single payment, the
total amount paid and tax withheld reported on
all Forms 1042-S cannot exceed the total
amounts paid to joint owners.
Electronic reporting. Withholding agents
or their agents generally must file electronically
if required to file 250 or more Forms 1042-S with
the IRS. You are encouraged to file electroni-
cally even if you are not required to.
A completed Form 4419, Application for Fil-
ing Information Returns Electronically, should
be filed at least 30 days before the due date of
the return. Returns may not be filed electroni-
cally until the application has been approved by
the IRS.
For information and instructions on filing
Forms 1042-S electronically, get Publication
1187, Specifications for Filing Form 1042-S,
Foreign Person’s U.S. Source Income Subject
to Withholding Electronically. If you file electroni-
cally, you will use the Filing Information Returns
Electronically (FIRE) system. You get to the
system through the Internet at fire.irs.gov.
Form 1042-T. If Form 1042-S is filed on paper,
it must be filed with Form 1042-T. You may need
to file more than one Form 1042-T. See the
instructions for that form for more information.
Deposit interest paid to alien individuals who
are residents of Canada. If you pay deposit
interest of $10 or more to a nonresident alien
individual who resides in Canada and is not a
U.S. citizen, you may have to report it on Form
1042-S. This reporting requirement generally
applies to interest that (a) is on a deposit main-
tained at a bank’s office in the United States,
and (b) is not effectively connected with a trade
or business within the United States. However,
this reporting requirement does not apply to in-
terest paid on certain bearer certificates of de-
posit as described in section 1.6049-8(b) of the
regulations if you pay that interest outside the
United States.
How to report. Although you only have to
report on Form 1042-S the deposit interest paid
to residents of Canada who are not U.S. citi-
zens, you can comply by reporting payments to
all foreign persons receiving bank deposit inter-
est, if that way is easier for you.
Determining residency. You determine
whether a payee is a Canadian resident based
on the permanent residence address required to
be provided on the Form W-8BEN. If you have
actual knowledge that the payee is a U.S. per-
son, you must report the payment on Form
1099-INT.
Statements to recipients. You must furnish a
statement to each recipient for whom you are
filing a Form 1042-S by the due date for filing
Publication 515 (April 2008)
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Forms 1042 and 1042-S with the IRS. You may
use a copy of the official Form 1042-S for this
purpose. Or, you may provide recipients with the
information together with, or on, other (commer-
cial) statements or notices. These statements
must clearly identify the type of income (as de-
scribed on the official form), the amount of tax
withheld, the withholding rate (including 00.00 if
exempt), and the country involved. You may
include more than one type of income on the
copies of the Form 1042-S that you provide to
the recipient of the income. You may not, how-
ever, include more than one income line on the
copy of the form filed with the IRS.
Extension of time to file. You can get an
automatic 6-month extension of time to file Form
1042 by filing Form 7004, Application for Auto-
matic 6-Month Extension of Time To File Certain
Business Income Tax, Information, and Other
Returns. File Form 7004 on or before the due
date of Form 1042. Form 7004 does not extend
the time for payment of tax.
The automatic and any approved addi-
! tional request only extend the due date
CAUTION
for filing the returns with the IRS. It
does not extend the due date for furnishing
statements to recipients.
You can get an automatic 30-day extension
of time to file Form 1042-S by filing Form 8809,
Application for Extension of Time To File Infor-
mation Returns. You should request an exten-
sion as soon as you are aware that an extension
is necessary, but no later than the due date for
filing Form 1042-S. You may request one addi-
tional extension of 30 days by submitting a sec-
ond Form 8809 before the end of the first
extension period. Requests for an additional ex-
tension are not automatically granted. Approval
or denial is based on administrative criteria and
guidelines. The IRS will send you a letter of
explanation approving or denying your request
for an additional extension.
You may request an extension of time to
provide the statements to recipients by sending
a letter to Enterprise Computing Center — Mar-
tinsburg, Information Reporting Program, Attn:
Extension of Time Coordinator, 240 Murall
Drive, Kearneysville, WV 25430. The letter must
include (a) your name, (b) your TIN, (c) your
address, (d) type of return, (e) a statement that
your extension request is for providing state-
ments to recipients, (f) reason for delay, and (g)
the signature of the payer or authorized agent.
Your request must be postmarked by the date
on which the statements are due to the recipi-
ents. If your request for an extension is ap-
proved, generally you will be granted a
maximum of 30 extra days to furnish the recipi-
ent statements. If you are requesting extensions
of time to file for more than 50 withholding
agents or payers, you must submit the extension
requests electronically. See Publication 1187.
Penalties. The penalty for not filing Form 1042
when due (including extensions) is usually 5% of
the unpaid tax for each month or part of a month
the return is late, but not more than 25% of the
unpaid tax.
A penalty may be imposed for failure to file
Form 1042-S when due (including extensions)
or for failure to provide complete and correct
information. The amount of the penalty depends
on when you file a correct Form 1042-S. The
penalty for each Form 1042-S is:
• $15 if you file a correct form within 30
days, with a maximum penalty of $75,000
per year ($25,000 for a small business),
• $30 if you file after 30 days but by August
1, with a maximum penalty of $150,000
($50,000 for a small business), or
• $50 if you file after August 1 or do not file
a correct form, with a maximum penalty of
$250,000 per year ($100,000 for a small
business).
A small business is a business that has aver-
age annual gross receipts of $5 million or less
for the most recent 3 tax years (or for the period
of its existence, if shorter) ending before the
calendar year in which the Forms 1042-S are
due.
If you fail to provide a complete and correct
statement to each recipient, a penalty of $50 for
each failure may be imposed. The maximum
penalty is $100,000 per year. If you intentionally
disregard the requirement to report correct infor-
mation, the penalty for each Form 1042-S (or
statement to recipient) is the greater of $100 or
10% of the total amount of the items that must
be reported, with no maximum penalty.
Failure to file electronically. If you are re-
quired to file Form 1042-S electronically but you
fail to do so, and you do not have an approved
waiver, you may be subject to a penalty of $50
per form unless you show reasonable cause.
The penalty applies separately to original and
amended returns.
Partnership
Withholding on
Effectively Connected
Income
Under section 1446, a partnership (foreign or
domestic) that has income effectively connected
with a U.S. trade or business (or income treated
as effectively connected) must pay a withholding
tax on the effectively connected taxable income
that is allocable to its foreign partners. A publicly
traded partnership must withhold tax on actual
distributions of effectively connected income.
See Publicly Traded Partnerships, later.
This withholding tax does not apply to in-
come that is not effectively connected with the
partnership’s U.S. trade or business. That in-
come is subject to NRA withholding tax, as dis-
cussed earlier in this publication.
Who Must Withhold
The partnership, or a withholding agent for the
partnership, must pay the withholding tax. A
partnership that must pay the withholding tax but
fails to do so, may be liable for the payment of
the tax and any penalties and interest.
The partnership must determine whether a
partner is a foreign partner. A foreign partner
can be a nonresident alien individual, foreign
corporation, foreign partnership, or foreign es-
tate or trust.
U.S. partner. A partner that is a U.S. person
should provide Form W-9 to the partnership.
A partnership may rely on a partner’s certifi-
cation of nonforeign status and assume that a
partner is not a foreign partner unless the form:
• Does not give the partner’s name, U.S.
taxpayer identification number, and ad-
dress, or
• Is not signed under penalties of perjury
and dated.
The partnership must keep the certification for
as long as it may be relevant to the partnership’s
liability for section 1446 tax.
The partnership may not rely on the certifica-
tion if it has actual knowledge or has reason to
know that any information on the form is incor-
rect or unreliable.
If a partnership does not receive a Form W-9
(or similar documentation) the partnership must
presume that the partner is a foreign person.
Foreign Partner
A partner that is a foreign person should provide
the appropriate Form W-8 (as shown in Chart D)
to the partnership.
Partners who have otherwise provided Form
W-8 to a partnership for purposes of section
1441 or 1442, as discussed earlier, can use the
same form for purposes of section 1446 if they
meet the requirements discussed earlier under
Documentation. However, a foreign simple trust
that has provided documentation for its benefi-
ciaries for purposes of section 1441 must pro-
vide a Form W-8 on its own behalf for purposes
of section 1446.
The partnership may not rely on the certifica-
tion if it has actual knowledge or has reason to
know that any information on the form is incor-
rect or unreliable.
The partnership must keep the certification
for as long as it may be relevant to the partner-
ship’s liability for section 1446 tax.
Chart D. Documentation for
Foreign Partners*
Nonresident aliens W-8BEN
Foreign
corporations W-8BEN
Foreign
partnerships W-8IMY
Foreign
governments W-8EXP
Foreign grantor
trusts** W-8IMY
Certain foreign
trusts and foreign
estates W-8BEN
Foreign tax-exempt
organizations
(including private
foundations) W-8EXP
Nominees W-8 used by
beneficial owner
* A partnership may substitute its own form for the
official version of Form W-8 to ascertain the identity
of its partners.
**A domestic grantor trust must provide a
statement as shown in section 1.1446-1(c)(2)(ii)(e)
and documentation for its grantor.

Publication 515 (April 2008) Page 31

Page 32 of 58 of Publication 515
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Amount of Withholding Tax
The amount a partnership must withhold is
based on its effectively connected taxable in-
come that is allocable to its foreign partners for
the partnership’s tax year. However, see Pub-
licly Traded Partnerships, later.
The foreign partner’s share of the partner-
ship’s gross effectively connected income is re-
duced by:
1. The partner’s share of partnership deduc-
tions connected to that income for the
year,
2. The partner’s tax treaty benefits related to
that income, and
3. The partner’s allowable prior years’ deduc-
tions and losses that the partnership takes
into consideration.
For purposes of item (3), the partner must pro-
vide a certification of the information to the part-
nership. For information on this certification, see
section 1.1446-6T of the regulations.
If a nonresident alien partner’s investment in
the partnership is the only activity producing
effectively connected income and the section
1446 tax is less than $1,000, the partnership is
not required to withhold. For information on the
certification in this situation, see section
1.1446-6T(c)(1)(iv) of the regulations.
Tax rate. The withholding tax rate on a part-
ner’s share of effectively connected income is
35%. However, the partnership may withhold at
the highest rate applicable to a particular type of
income allocated to a noncorporate partner pro-
vided the partnership received the appropriate
documentation. See section 1.1446-3(a)(2)(ii) of
the regulations.
Installment payments. A partnership must
make installment payments of withholding tax
on its foreign partners’ share of effectively con-
nected taxable income whether or not distribu-
tions are made during the partnership’s tax year.
The amount of a partnership’s installment pay-
ment is the sum of the installment payments for
each of its foreign partners. The amount of each
installment payment can be figured by using
Form 8804-W.
Date payments are due. Payments of
DUE withholding tax must be made during
the partnership’s tax year in which the
effectively connected taxable income is derived.
A partnership must pay the IRS a portion of the
annual withholding tax for its foreign partners by
the 15th day of the 4th, 6th, 9th, and 12th
months of its tax year for U.S. income tax pur-
poses. Any additional amounts due are to be
paid with Form 8804, the annual partnership
withholding tax return, discussed later.
A foreign partner’s share of withholding tax
paid by a partnership is treated as distributed to
the partner on the earliest of:
• The day on which the tax was paid by the
partnership,
• The last day of the partnership’s tax year
for which the tax was paid, or
• The last day on which the partner owned
an interest in the partnership during that
year.
Page 32
The amount treated as distributed to the partner
is generally treated as an advance or draw
under section 1.731-1(a)(1)(ii) of the regulations
to the extent of the partner’s share of income for
the partnership year.
Notification to partners. Generally, a part-
nership must notify each foreign partner of the
tax withheld on its behalf within 10 days of the
installment payment date. No particular form is
required for this notification. For more informa-
tion on the substance of the notification and
exceptions, see section 1.1446-3(d)(1)(i) of the
regulations.
Real property gains. If a domestic partner-
ship disposes of a U.S. real property interest, the
gain is treated as effectively connected income
and the partnership or withholding agent must
withhold following the rules discussed here. A
domestic partnership’s compliance with these
rules satisfies the requirements for withholding
on the disposition of U.S. real property interests
(discussed later).
Reporting and Paying the Tax
Three forms are required for reporting and pay-
ing over tax withheld on effectively connected
income allocable to foreign partners. This does
not apply to publicly traded partnerships, dis-
cussed later.
Form 8804, Annual Return for Partnership
Withholding Tax (Section 1446). The with-
holding tax liability of the partnership for its tax
year is reported on Form 8804. Form 8804 is
also a transmittal form for Forms 8805.
Any additional withholding tax owed for the
partnership’s tax year is paid (in U.S. currency)
with Form 8804. A Form 8805 for each foreign
partner must be attached to Form 8804, whether
or not any withholding tax was paid.
File Form 8804 by the 15th day of the
DUE 4th month after the close of the part-
nership’s tax year. However, a partner-
ship that keeps its books and records outside
the United States and Puerto Rico has until the
15th day of the 6th month after the close of the
partnership’s tax year to file. If you need more
time to file Form 8804, you may file Form 7004
to request an automatic 6-month extension of
time to file. Form 7004 does not extend the time
to pay the tax.
Form 8805, Foreign Partner’s Information
Statement of Section 1446 Withholding Tax.
Form 8805 is used to show the amount of
effectively connected taxable income and any
withholding tax payments allocable to a foreign
partner for the partnership’s tax year. At the end
of the partnership’s tax year, Form 8805 must be
sent to each foreign partner whether or not any
withholding tax is paid. It must be delivered to
the foreign partner by the due date of the part-
nership return (including extensions). A copy of
Form 8805 for each foreign partner must also be
attached to Form 8804 when it is filed.
A copy of Form 8805 must be attached to the
foreign partner’s U.S. income tax return to take a
credit on its Form 1040NR or Form 1120-F.
Form 8813, Partnership Withholding Tax
Payment Voucher (Section 1446). This form
is used to make payments of withheld tax to the
11:14 - 23-APR-2008
United States Treasury. Payments must be
made in U.S. currency by the payment dates
(see Date payments are due, earlier).
Penalties. A penalty may be imposed for fail-
ure to file Form 8804 when due (including exten-
sions). It is the same as the penalty for not filing
Form 1042 discussed earlier under Returns Re-
quired.
A penalty may be imposed for failure to file
Form 8805 when due (including extensions) or
for failure to provide complete and correct infor-
mation. The amount of the penalty depends on
when you file a correct Form 8805. The penalty
for each Form 8805 is:
• $15 if you file a correct form within 30
days, with a maximum penalty of $75,000
per year ($25,000 for a small business), or
• $50 if you file after 30 days or do not file a
correct form, with a maximum penalty of
$250,000 per year ($100,000 for a small
business).
A small business is a business that has aver-
age annual gross receipts of $5 million or less
for the most recent 3 tax years (or for the period
of its existence, if shorter) ending before the
calendar year in which the Forms 8805 are due.
If you fail to provide a complete and correct
Form 8805 to each partner, a penalty of $50 for
each failure may be imposed. The maximum
penalty is $100,000 per year.
If you intentionally disregard the requirement
to report correct information, the penalty for
each Form 8805 is the greater of $100 or 10% of
the total amount of the items that must be re-
ported, with no maximum penalty.
Identification numbers. A partnership that
has not been assigned a U.S. TIN must obtain
one. If a number has not been assigned by the
due date of the first withholding tax payment, the
partnership should enter the date the number
was applied for on Form 8813 when making its
payment. As soon as the partnership receives
its TIN, it must immediately provide that number
to the IRS.
To ensure proper crediting of the withholding
tax when reporting to the IRS, the partnership
must include each partner’s U.S. TIN on Form
8805. If there are partners in the partnership
without identification numbers, the partnership
should inform them of the need to get a number.
See U.S. Taxpayer Identification Numbers, ear-
lier.
Publicly Traded Partnerships
A publicly traded partnership (PTP) that has
effectively connected income, gain, or loss must
pay withholding tax on any distributions of that
income made to its foreign partners. A PTP must
use Forms 1042 and 1042-S (Income Code 27)
to report withholding from distributions. The rate
of withholding is 35%.
A PTP is any partnership an interest in which
is regularly traded on an established securities
market or is readily tradable on a secondary
market. These rules do not apply to a PTP
treated as a corporation under section 7704 of
the Code.
Foreign partner. The partnership determines
whether a partner is a foreign partner using the
rules discussed earlier under Foreign Partner.
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Nominee. The withholding agent under this
section can be the PTP or a nominee. For this
purpose, a nominee is a domestic person that
holds an interest in a PTP on behalf of a foreign
person. The nominee is treated as the withhold-
ing agent only to the extent of the amount speci-
fied in the qualified notice given to the nominee
by the PTP. If a nominee is designated as the
withholding agent, the obligation to withhold is
imposed solely on the nominee. The nominee
must report the distributions and withheld
amounts on Forms 1042 and 1042-S. For more
information, see section 1.1446-4(b) and (d) of
the regulations.
Distributions subject to withholding. The
partnership or nominee must withhold tax on
any actual distributions of money or property to
foreign partners. The amount of the distribution
includes the amount of any section 1446 tax
required to be withheld. In the case of a partner-
ship that receives a partnership distribution from
another partnership (a tiered partnership), the
distribution also includes the tax withheld from
that distribution.
If the distribution is in property other than
money, the partnership cannot release the prop-
erty until it has enough funds to pay over the
withholding tax.
A publicly traded partnership that complies
with these withholding requirements satisfies
the requirements discussed later under U.S.
Real Property Interest. Distributions subject to
withholding include:
• Amounts subject to withholding under sec-
tion 1445(e)(1) of the Code on distribu-
tions pursuant to an election under section
1.1445-5(c)(3) of the regulations, and
• Amounts not subject to withholding under
section 1445 of the Code because the dis-
tributee is a partnership or is a foreign
corporation that has made an election to
be treated as a domestic corporation.
Excluded amounts. Partnership distribu-
tions are considered to be paid out of the follow-
ing types of income in the order listed.
1. Amounts of noneffectively connected in-
come distributed by the partnership and
subject to NRA withholding under section
1441 or 1442, as discussed earlier.
2. Amounts of effectively connected income
not subject to withholding under section
1446 (for example, amounts exempt by
treaty).
3. Amounts subject to withholding under
these rules.
4. Amounts not listed in (1) through (3).
U.S. Real
Property Interest
The disposition of a U.S. real property interest
by a foreign person (the transferor) is subject to
income tax withholding. If you are the tranferee,
you must find out if the transferor is a foreign
person. If the transferor is a foreign person and
Publication 515 (April 2008)
you fail to withhold, you may be held liable for
the tax.
Foreign person. A foreign person is a nonres-
ident alien individual, foreign corporation that
has not made an election under section 897(i) of
the Internal Revenue Code to be treated as a
domestic corporation, foreign partnership, for-
eign trust, or foreign estate. It does not include a
resident alien individual.
Transferor. A transferor is any foreign person
that disposes of a U.S. real property interest by
sale, exchange, gift, or any other transfer. A
transfer includes distributions to shareholders of
a corporation and beneficiaries of a trust or es-
tate.
The owner of a disregarded entity is treated
as the transferor of the property, not the entity.
Transferee. A transferee is any person, for-
eign or domestic, that acquires a U.S. real prop-
erty interest by purchase, exchange, gift, or any
other transfer.
U.S. real property interest. A U.S. real prop-
erty interest is an interest, other than as a credi-
tor, in real property (including an interest in a
mine, well, or other natural deposit) located in
the United States or the U.S. Virgin Islands, as
well as certain personal property that is associ-
ated with the use of real property (such as farm-
ing machinery). It also means any interest, other
than as a creditor, in any domestic corporation
unless it is established that the corporation was
at no time a U.S. real property holding corpora-
tion during the shorter of the period during which
the interest was held, or the 5-year period end-
ing on the date of disposition. If on the date of
disposition, the corporation did not hold any U.S.
real property interests, and all the interests held
at any time during the shorter of the applicable
periods were disposed of in transactions in
which the full amount of any gain was recog-
nized, then an interest in the corporation is not a
U.S. real property interest.
Amount to withhold. The transferee must de-
duct and withhold a tax equal to 10% (or other
amount) of the total amount realized by the for-
eign person on the disposition (for example,
10% of the purchase price).
The amount realized is the sum of:
• The cash paid, or to be paid (principal
only),
• The fair market value of other property
transferred, or to be transferred, and
• The amount of any liability assumed by
the transferee or to which the property is
subject immediately before and after the
transfer.
If the property transferred was owned jointly by
U.S. and foreign persons, the amount realized is
allocated between the transferors based on the
capital contribution of each transferor.
Foreign corporations. A foreign corpora-
tion that distributes a U.S. real property interest
must withhold a tax equal to 35% of the gain it
recognizes on the distribution to its sharehold-
ers.
Domestic corporations. A domestic corpo-
ration must withhold a tax equal to 10% of the
fair market value of the property distributed to a
foreign shareholder if:
11:14 - 23-APR-2008
• The shareholder’s interest in the corpora-
tion is a U.S. real property interest, and
• The property distributed is either in re-
demption of stock or in liquidation of the
corporation.
U.S. real property holding corporations.
A distribution from a domestic corporation that is
a U.S. real property holding corporation
(USRPHC) is generally subject to NRA withhold-
ing and withholding under the U.S. real property
interest provisions. This also applies to a corpo-
ration that was a USRPHC at any time during
the shorter of the period during which the U.S.
real property interest was held, or the 5-year
period ending on the date of disposition. A
USRPHC can satisfy both withholding provi-
sions if it withholds under one of the following
procedures.
• Apply NRA withholding on the full amount
of the distribution, whether or not any por-
tion of the distribution represents a return
of basis or capital gain. If a reduced tax
rate applies under an income tax treaty,
then the rate of withholding must not be
less than 10%, unless the treaty specifies
a lower rate for distributions from a
USRPHC.
• Apply NRA withholding to the portion of
the distribution that the USRPHC esti-
mates is a dividend. Then, withhold 10%
on the remainder of the distribution (or on
a smaller amount if a withholding certifi-
cate is obtained and the amount of the
distribution that is a return of capital is
established).
The same procedure must be used for all distri-
butions made during the year. A different proce-
dure may be used each year.
Partnerships. If a partnership disposes of a
U.S. real property interest at a gain, the gain is
treated as effectively connected income and is
subject to the rules explained earlier under Part-
nership Withholding on Effectively Connected
Income.
Trusts and estates. You are a withholding
agent if you are a trustee, fiduciary, or executor
of a trust or estate having one or more foreign
beneficiaries. You must establish a U.S. real
property interest account. You enter in the ac-
count all gains and losses realized during the
taxable year of the trust or estate from disposi-
tions of U.S. real property interests. You must
withhold 35% on any distribution to a foreign
beneficiary that is attributable to the balance in
the real property interest account on the day of
the distribution. A distribution from a trust or
estate to a beneficiary (foreign or domestic) will
be treated as attributable first to any balance in
the U.S. real property interest account and then
to other amounts.
A trust with more than 100 beneficiaries may
elect to withhold from each distribution 35% of
the amount attributable to the foreign benefi-
ciary’s proportionate share of the current bal-
ance of the trust’s real property interest account.
This election does not apply to publicly traded
trusts or real estate investment trusts (REITs).
For more information about this election, see
section 1.1445-5(c) of the regulations.
Page 33
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Qualified investment entities. Special rules
apply to qualified investment entities (QIEs). A
QIE is any real estate investment trust (REIT) or
any regulated investment company (RIC) that is
a U.S. real property holding corporation. In de-
termining if a RIC is a U.S. real property holding
corporation, the RIC is required to include as
U.S. real property interests its holdings of stock
in a RIC or REIT that is a U.S. real property
holding corporation, even if that stock is regu-
larly traded and the RIC owns less than 5% of
the stock.
Generally, any distribution from a QIE attrib-
utable to gain from the sale or exchange of a
U.S. real property interest is treated as such
gain by the nonresident alien, foreign corpora-
tion, or other QIE receiving the distribution. A
distribution by a QIE on stock regularly traded on
an established securities market in the United
States is not treated as gain from the sale or
exchange of a U.S. real property interest if the
nonresident alien or foreign corporation did not
own more than 5% of that stock at any time
during the 1-year period ending on the date of
the distribution. A distribution that is not treated
as gain from the sale or exchange of a U.S. real
property interest is included in the shareholder’s
gross income as a dividend.
After 2007, these rules will apply to a
! RIC only if the distribution by the RIC to
CAUTION
a nonresident alien or foreign corpora-
tion is attributable to a distribution received by
the RIC from a REIT.
A distribution by a QIE to a nonresident alien
or foreign corporation that is treated as gain from
the sale or exchange of a U.S. real property
interest by the shareholder is subject to with-
holding at 35%.
Domestically controlled QIE. The sale of
an interest in a domestically controlled QIE is not
the sale of a U.S. real property interest. The
entity is domestically controlled if at all times
during the testing period less than 50% in value
of its stock was held, directly or indirectly, by
foreign persons. The testing period is the shorter
of (a) the 5-year period ending on the date of
disposition, or (b) the period during which the
entity was in existence.
If a foreign shareholder in a domestically
controlled QIE disposes of an interest in the QIE
in an applicable wash sale transaction, special
rules apply. In this transaction, the nonresident
alien, foreign corporation, or other QIE:
1. Disposes of an interest in the domestically
controlled QIE during the 30-day period
before the ex-dividend date of a distribu-
tion that would have been treated by the
shareholder as gain from the sale or ex-
change of a U.S. real property interest,
and
2. Acquires, or enters into a contract or op-
tion to acquire, a substantially identical in-
terest in that entity during the 61-day
period that began on the first day of the
30-day period.
If this occurs, the shareholder is treated as hav-
ing gain from the sale or exchange of a U.S. real
property interest in an amount equal to the distri-
bution that would have been treated as such
gain. This also applies to any substitute dividend
payment. No withholding is required on these
transactions.
Page 34
A transaction is not treated as an applicable
wash sale transaction if:
• The shareholder actually receives the dis-
tribution from the domestically controlled
QIE on either the interest disposed of, or
acquired, in the transaction, or
• The shareholder disposes of any class of
stock in a QIE that is regularly traded on
an established securities market in the
United States but only if the shareholder
did not own more than 5% of that stock at
any time during the 1-year period ending
on the date of the distribution.
After 2007, the applicable wash sale transac-
tion rules will apply to a RIC only if the distribu-
tion by the RIC is attributable to a distribution
received by the RIC from a REIT.
Additional information. For additional infor-
mation on the withholding rules that apply to
corporations, trusts, estates, and qualified in-
vestment entities, see section 1445 of the Inter-
nal Revenue Code and the related regulations.
For additional information on the withholding
rules that apply to partnerships, see the previ-
ous discussion.
You may also write to the:
Director, Philadelphia Service Center
International Team
P.O. Box 21086
Philadelphia, PA 19114-0586
Exceptions. You do not have to withhold if
any of the following apply.
1. You (the transferee) acquire the property
for use as a home and the amount realized
(sales price) is not more than $300,000.
You or a member of your family must have
definite plans to reside at the property for
at least 50% of the number of days the
property is used by any person during
each of the first two 12-month periods fol-
lowing the date of transfer. When counting
the number of days the property is used,
do not count the days the property will be
vacant. For this exception, the transferee
must be an individual.
2. The property disposed of is an interest in a
domestic corporation if any class of stock
of the corporation is regularly traded on an
established securities market. However,
this exception does not apply to certain
dispositions of substantial amounts of
non-publicly traded interests in publicly
traded corporations.
3. The disposition is of an interest in a do-
mestic corporation and that corporation
furnishes you a certification stating, under
penalties of perjury, that the interest is not
a U.S. real property interest. Generally, the
corporation can make this certification only
if the corporation was not a USRPHC dur-
ing the previous 5 years (or, if shorter, the
period the interest was held by its present
owner), or as of the date of disposition, the
interest in the corporation is not a U.S. real
property interest by reason of section
897(c)(1)(B) of the Code. The certification
must be dated not more than 30 days
before the date of transfer.
11:14 - 23-APR-2008
4. The transferor gives you a certification
stating, under penalties of perjury, that the
transferor is not a foreign person and con-
taining the transferor’s name, U.S. tax-
payer identification number, and home
address (or office address, in the case of
an entity).
5. You receive a withholding certificate from
the Internal Revenue Service that excuses
withholding. See Withholding Certificates,
later.
6. The transferor gives you written notice that
no recognition of any gain or loss on the
transfer is required because of a nonrec-
ognition provision in the Internal Revenue
Code or a provision in a U.S. tax treaty.
You must file a copy of the notice by the
20th day after the date of transfer with the
Ogden Service Center, P.O. Box 409101,
Stop 6731/6732, Ogden, UT 84409.
7. The amount the transferor realizes on the
transfer of a U.S. real property interest is
zero.
8. The property is acquired by the United
States, a U.S. state or possession, a politi-
cal subdivision, or the District of Columbia.
9. The grantor realizes an amount on the
grant or lapse of an option to acquire a
U.S. real property interest. However, you
must withhold on the sale, exchange, or
exercise of that option.
10. The disposition is of an interest in a pub-
licly traded partnership or trust. However,
this exception does not apply to certain
dispositions of substantial amounts of
non-publicly traded interests in publicly
traded partnerships or trusts.
Certifications. The certifications in items
(3) and (4) are not effective if you have actual
knowledge, or receive a notice from an agent,
that they are false. If you are required by regula-
tions to furnish a copy of the certification to the
IRS and you fail to do so in the time and manner
prescribed, the certifications are not effective.
Liability of agents. If you receive either of
the certifications discussed in item (3) or (4) and
the transferor’s agent or your agent (the trans-
feree’s agent) has actual knowledge that the
certification is false, or in the case of (3), that the
corporation is a foreign corporation, the agent
must notify you, or the agent will be held liable
for the tax. The agent’s liability is limited to the
amount of compensation the agent gets from the
transaction.
An agent is any person who represents the
transferor or transferee in any negotiation with
another person (or another person’s agent) re-
lating to the transaction, or in settling the trans-
action. A person is not treated as an agent if the
person only performs one or more of the follow-
ing acts related to the transaction:
• Receipt and disbursement of any part of
the consideration,
• Recording of any document,
• Typing, copying, and other clerical tasks,
• Obtaining title insurance reports and re-
ports concerning the condition of the prop-
erty, or
Publication 515 (April 2008)
Page 35 of 58 of Publication 515
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• Transmitting documents between the par-
ties.
Reporting and
Paying the Tax
Transferees must use Forms 8288 and 8288-A
to report and pay over any tax withheld on the
acquisition of U.S. real property interests. These
forms must also be used by corporations, es-
tates, and QIEs that must withhold tax on distri-
butions and other transactions involving U.S.
real property interests. You must include the
U.S. TIN of both the transferor and the trans-
feree on the forms.
For partnerships disposing of U.S. real prop-
erty interests, the manner of reporting and pay-
ing over the tax withheld is the same as
discussed earlier under Partnership Withholding
on Effectively Connected Income.
Publicly traded trusts must use Forms 1042
and 1042-S to report and pay over tax withheld
on distributions from dispositions of U.S. real
property interests.
QIEs must use Forms 1042 and 1042-S for a
distribution to a nonresident alien or foreign cor-
poration that is treated as a dividend as dis-
cussed earlier under Qualified investment
entities.
Form 8288, U.S. Withholding Tax Return for
Dispositions by Foreign Persons of U.S. Real
Property Interests. The tax withheld on the
acquisition of a U.S. real property interest from a
foreign person is reported and paid over using
Form 8288. Form 8288 also serves as the trans-
mittal form for copies A and B of Form 8288-A.
Generally, you must file Form 8288 by
DUE
the 20th day after the date of the trans-
fer.
If an application for a withholding certificate
(discussed later) is submitted to the IRS before
or on the date of a transfer and the application is
still pending with the IRS on the date of transfer,
the correct withholding tax must be withheld, but
does not have to be reported and paid over
immediately. The amount withheld (or lesser
amount as determined by the IRS) must be
reported and paid over within 20 days following
the day on which a copy of the withholding
certificate or notice of denial is mailed by the
IRS.
If the principal purpose of applying for a with-
holding certificate is to delay paying over the
withheld tax, the transferee will be subject to
interest and penalties. The interest and penal-
ties will be assessed for the period beginning on
the 21st day after the date of transfer and ending
on the day the payment is made.
Form 8288-A, Statement of Withholding on
Dispositions by Foreign Persons of U.S. Real
Property Interests. The withholding agent
must prepare a Form 8288-A for each person
from whom tax has been withheld. Attach copies
A and B of Form 8288-A to Form 8288. Keep
Copy C for your records.
IRS will stamp Copy B and send it to the
person subject to withholding. That person must
file a U.S. income tax return and attach the
stamped Form 8288-A to receive credit for any
tax withheld.
Publication 515 (April 2008)
A stamped copy of Form 8288-A will
! not be provided to the transferor if the
CAUTION
transferor’s TIN is not included on that
form. In this case, to get credit for the withheld
amount, the transferor must attach to its U.S.
income tax return substantial evidence of with-
holding (for example, closing documents) and a
statement that contains all the required informa-
tion shown on Forms 8288 and 8288-A including
the transferor’s TIN.
Form 1099-S, Proceeds From Real Estate
Transactions. Generally, the real estate bro-
ker or other person responsible for closing the
transaction must report the sale of the property
to the IRS using Form 1099-S. For more infor-
mation about Form 1099-S, see the Instructions
for Form 1099-S and the General Instructions
for Forms 1099, 1098, 5498, and W-2G.
Withholding Certificates
The amount that must be withheld from the dis-
position of a U.S. real property interest can be
adjusted by a withholding certificate issued by
the IRS. The transferee, the transferee’s agent,
or the transferor may request a withholding cer-
tificate. The IRS will generally act on these re-
quests within 90 days after receipt of a complete
application including the TINs of all the parties to
the transaction. A transferor that applies for a
withholding certificate must notify the transferee
in writing that the certificate has been applied for
on the day of or the day prior to the transfer.
A withholding certificate may be issued due
to:
1. A determination by the IRS that reduced
withholding is appropriate because either:
a. The amount that must be withheld
would be more than the transferor’s
maximum tax liability, or
b. Withholding of the reduced amount
would not jeopardize collection of the
tax,
2. The exemption from U.S. tax of all gain
realized by the transferor, or
3. An agreement for the payment of tax pro-
viding security for the tax liability, entered
into by the transferee or transferor.
Applications for withholding certificates are
divided into six basic categories. This catego-
rizing provides for specific information that is
needed to process the applications. The six cat-
egories are:
1. Applications based on a claim that the
transfer is entitled to nonrecognition treat-
ment or is exempt from tax,
2. Applications based solely on a calculation
of the transferor’s maximum tax liability,
3. Applications under special installment sale
rules,
4. Applications based on an agreement for
the payment of tax with conforming secur-
ity,
5. Applications for blanket withholding certifi-
cates, and
6. Applications on any other basis.
11:14 - 23-APR-2008
The applicant must make available to
the IRS, within the time prescribed, all
RECORDS
information required to verify that rep-
resentations relied upon in accepting the agree-
ment are accurate, and that the obligations
assumed by the applicant will be performed pur-
suant to the agreement. Failure to provide re-
quested information promptly will usually result
in rejection of the application, unless the IRS
grants an extension of the target date.
Categories (1), (2), and (3). Use Form
8288-B, Application for Withholding Certificate
for Dispositions by Foreign Persons of U.S. Real
Property Interests, to apply for a withholding
certificate. Follow the instructions for the form.
Categories (4), (5), and (6). Do not use Form
8288-B for applications under categories (4),
(5), and (6). For these categories follow the
instructions given here and under the specific
category.
All applications for withholding certificates
must use the following format. The information
must be provided in paragraphs labeled to cor-
respond with the numbers and letters set forth
below. If the information requested does not
apply, place “N/A” in the relevant space.
1. Information on the application category:
a. State which category (4, 5, or 6) de-
scribes the application,
b. If a category (4) application:
i. State whether the proposed agree-
ment secures (A) the transferor’s
maximum tax liability, or (B) the
amount that would otherwise have
to be withheld, and
ii. State whether the proposed agree-
ment and security instrument con-
form to the standard formats.
2. Information on the transferee or transferor:
a. State the name, address, and TIN of
the person applying for the withholding
certificate (if this person does not have
a TIN and is eligible for an ITIN, he or
she can apply for the ITIN by attaching
the application to a completed Form
W-7 and forwarding the package to the
address given in the Form W-7 instruc-
tions),
b. State whether that person is the trans-
feree or transferor, and
c. State the name, address, and TIN of all
other transferees and transferors of the
U.S. real property interest for which the
withholding certificate is sought.
3. Information on the U.S. real property inter-
est for which the withholding certificate is
sought, state the:
a. Type of interest (such as interest in real
property, in associated personal prop-
erty, or in a domestic U.S. real property
holding corporation),
b. Contract price,
c. Date of transfer,
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Page 36 of 58 of Publication 515
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d. Location and general description (if an
interest in real property),
e. Class or type and amount of the interest
in a U.S. real property holding corpora-
tion, and
f. Whether in the 3 preceding tax years:
(1) U.S. income tax returns were filed
relating to the U.S. real property inter-
est, and if so, when and where those
returns were filed, and if not, why re-
turns were not filed, and (2) U.S. in-
come taxes were paid relating to the
U.S. real property interest, and if so, the
amount of tax paid.
4. Provide full information concerning the ba-
sis for the issuance of the withholding cer-
tificate. Although the information to be
included in this section of the application
will vary from case to case, the rules
shown under the specific category provide
general guidelines for the inclusion of ap-
propriate information for that category.
The application must be signed by the indi-
vidual, or a duly authorized agent (with a copy of
the power of attorney, such as Form 2848, at-
tached), a responsible officer in the case of a
corporation, a general partner in the case of a
partnership, or a trustee, executor, or equivalent
fiduciary in the case of a trust or estate. The
person signing the application must verify under
penalties of perjury that all representations are
true, correct, and complete to that person’s
knowledge and belief. If the application is based
in whole or in part on information provided by
another party to the transaction, that information
must be supported by a written verification
signed under penalties of perjury by that party
and attached to the application.
Send applications to the:
Ogden Service Center
P.O. Box 409101, Stop 6731/6732
Ogden, UT 84409
Category (4) applications. If the application
is based on an agreement for the payment of
tax, the application must include:
• Information establishing the transferor’s
maximum tax liability, or the amount that
otherwise has to be withheld,
• A signed copy of the agreement proposed
by the applicant, and
• A copy of the security instrument pro-
posed by the applicant.
Either the transferee or the transferor may enter
into an agreement for the payment of tax. The
agreement is a contract between the IRS and
any other person and consists of two necessary
elements. Those elements are:
• A detailed description of the rights and ob-
ligations of each, and
• A security instrument or other form of se-
curity acceptable to the Commissioner or
his delegate.
For more information on the agreement for the
payment of tax, including a sample agreement,
see section 5 of Revenue Procedure 2000-35.
Page 36
Revenue Procedure 2000-35 is in Cumulative
Bulletin 2000-2, or it can be found on page 211
of Internal Revenue Bulletin 2000-35 at www.irs.
gov/pub/irs-irbs/irb00-35.pdf.
There are four major types of security ac-
ceptable to the IRS. They are:
• Bond with surety or guarantor,
• Bond with collateral,
• Letter of credit, and
• Guarantee (corporate transferors).
The IRS may, in unusual circumstances and at
its discretion, accept any additional form of se-
curity that it finds to be adequate.
For more information on acceptable security
instruments, including sample forms of these
instruments, see section 6 of Revenue Proce-
dure 2000-35.
Category (5) applications. A blanket with-
holding certificate may be issued if the transferor
holding the U.S. real property interests provides
an irrevocable letter of credit or a guarantee and
enters into a tax payment and security agree-
ment with the IRS. A blanket withholding certifi-
cate excuses withholding concerning multiple
dispositions of those property interests by the
transferor or the transferor’s legal representa-
tive during a period of no more than 12 months.
For more information, see section 9 of Reve-
nue Procedure 2000-35.
Category (6) applications. These are non-
standard applications and may be of the follow-
ing types.
Agreement for payment of tax with non-
conforming security. An applicant seeking to
enter into an agreement for the payment of tax
but wanting to provide a nonconforming type of
security must include the following in the appli-
cation:
1. The information required for Category (4)
applications, discussed earlier,
2. A description of the nonconforming secur-
ity proposed by the applicant, and
3. A memorandum of law and facts establish-
ing that the proposed security is valid and
enforceable and that it adequately protects
the government’s interest.
Other nonstandard applications. An ap-
plication for a withholding certificate not previ-
ously described must explain in detail the
proposed basis for the issuance of the certificate
and set forth the reasons justifying the issuance
of a certificate on that basis.
Amendments to Applications
An applicant for a withholding certificate may
amend an otherwise complete application by
sending an amending statement to the address
shown earlier. There is no particular form re-
quired, but the amending statement must pro-
vide the following information:
• The name, address, and TIN of the person
providing the amending statement specify-
ing whether that person is the transferee
or transferor,
11:14 - 23-APR-2008
• The date of the original application for a
withholding certificate that is being
amended,
• A brief description of the real property in-
terest for which the original application for
a withholding certificate was provided, and
• The basis for the amendment including
any change in the facts supporting the
original application for a withholding certifi-
cate and any change in the terms of the
withholding certificate.
The statement must be signed and accompa-
nied by a penalties of perjury statement.
If an amending statement is provided, the
time in which the IRS must act upon the applica-
tion is extended by 30 days. If the amending
statement substantially changes the original ap-
plication, the time for acting upon the application
is extended by 60 days. If an amending state-
ment is received after the withholding certificate
has been signed, but has not been mailed to the
applicant, the IRS will have a 90-day extension
of time in which to act.
Tax Treaty Tables
The United States has income tax treaties (or
conventions) with a number of foreign countries
under which residents (sometimes limited to citi-
zens) of those countries are taxed at a reduced
rate or are exempt from U.S. income taxes on
certain income received from within the United
States.
Income that is exempt under a treaty is not
subject to withholding at source under the statu-
tory rules discussed in this publication.
Three tables follow:
Table 1 lists the withholding rates on in-
come other than personal service income.
Table 2 lists the different types of personal
service income that are entitled to an exemption
from, or reduction in, withholding.
Table 3 shows where the full text of each
treaty and protocol may be found in the Cumula-
tive Bulletins if it has been published.
These tables are not meant to be a
! complete guide to all provisions of
CAUTION
every income tax treaty. For detailed
information, you must consult the provisions of
the tax treaty that apply to the country of the
nonresident alien to whom you are making pay-
ment.
You can obtain the full text of these treaties
on the Internet at www.irs.gov.
See New treaty and protocols under What’s
New at the beginning of this publication for the
effective dates of the new treaty with Belgium
and the protocols with Denmark, Finland, and
Germany. Because of the effective date election
available under the treaty with Belgium and the
protocol with Germany, two entries are shown
for those countries.
Publication 515 (April 2008)
 Table 1. Withholding Tax Rates on Income Other Than Personal Service Income Under Chapter 3, Internal Revenue Code, and Income Tax
Treaties—For Withholding in 2008
Income code number 1 2 3 6 7 9 10 11 12 13 14
Country of residence of payee Interest Dividends Copyright royaltiesdd Real
Interest paid to Property
paid by controlling Qualifying Motion Income and
U.S. Interest on foreign Paid by U.S. for direct Picture Natural Pensions
obligors real property corpora- corporations– dividend Capital Industrial and Resources and
Name Code General dd mortgages dd tions dd general a,dd rate a,dd Gains e,u,dd Royalties dd Television Other Royalties u Annuities

Publication 515 (April 2008)

I g,k,nn g,k,ee,nn g,k,nn g,mm g,mm,oo g g g d
Australia AS 10 10 10 15 15 30 5 5 5 30 0
I g,jj g,ee,jj g,jj g,w g,w g g g g
Austria AU 0 0 0 15 5 0 0 10 0 30 0
I g,bb,jj g,bb,ee,jj g,bb,jj g,mm b,g,mm g g g g d,f,q
Bangladesh BG 10 10 10 15 10 0 10 10 10 30 0
I g g g g,w b,g,w g g g g d,f
Barbados BB 5 5 5 15 5 0 5 5 5 30 0
I g g g g b,g g g h g d,f
Belgium (old treaty) BE 15 15 15 15 5 0 0 0 0 30 0
I g,jj g,ee,jj g,jj g, ss,tt g,oo,ss,tt g g g g d,f
Belgium (new treaty) BE 0 0 0 15 5 0 0 0 0 30 0
I g g,ee g g,w g,w r g g g
Canada CA 10 10 10 15 5 30 0 10 0 30 15
I g g g g g g,v g g d,t
Page 37 of 58 of Publication 515

China, People’s Republic of CH 10 10 10 10 10 30 10 10 10 30 0

Commonwealth of
n o
III
Independent States 0 30 30 30 30 0 0 0 0 30 30
I g g g g b,g g g g g d,f
Cyprus CY 10 10 10 15 5 0 0 0 0 30 0
I g g,ee g g,w b,g,w g g g g d,f
Czech Republic EZ 0 0 0 15 5 0 10 0 0 30 0
I g,kk g,ee,kk g,kk g,ss,tt g,oo,ss,tt g g g g c,d,t
Denmark DA 0 0 0 15 5 0 0 0 0 30 30
I h h h b,h h h h g d,f
Egypt EG 15 30 15 15 5 0 0 0 15 30 0
I g,kk g,ee,kk g,kk g,w b,g,w g g,aa g g d,f
Estonia EN 10 10 10 15 5 0 5 10 10 30 0
I g,kk g,ee,kk g,kk g,ss,tt g,oo,ss,tt g g g g d,f
Finland FI 0 0 0 15 5 0 5 0 0 30 0
I g g,ee g g,mm b,g,mm g g g g d
France FR 0 0 0 15 5 0 5 0 0 30 30
I g g g g,w b,g,w g g g,cc g
Germany (old treaty) GM 0 0 0 15 5 0 0 0 0 30 d,f
I g,jj g,ee,jj g,jj g, ss,tt g,oo,ss,tt g g g,cc g d,f
0
Germany (as modified) GM 0 0 0 15 5 0 0 0 0 30 0
h h h h d
II
Greece GR 0 0 30 30 30 30 0 30 0 30 0
I g g g g b,g g g g g d,f
Hungary HU 0 0 0 15 5 0 0 0 0 30 0
I g g g g b,g g g g d,f
Iceland IC 0 0 0 15 5 0 0 30 0 30 0
I g,z g,z g g,w b,g,w g,aa g g d,f
India IN 15 15 15 25 15 30 10 15 15 30 0
g g g g b,g g g,aa g g d,q
I
Indonesia ID 10 10 10 15 10 0 10 10 10 30 15
g g,ee g g,mm g,mm g g g g d,f
I
Ireland EI 0 0 0 15 15 0 0 0 0 30 0
I z,gg z,ee,gg z,gg w,gg b,w,gg gg gg gg gg f
Israel IS 171⁄2 171⁄2 171⁄2 25 121⁄2 0 15 10 10 30 0
g g g g b,g g g,s g g d,f
I
Italy IT 15 15 15 15 5 0 10 8 5 30 0
g g g g b,g g g g g d,f,p
I
Jamaica JM 121⁄2 121⁄2 121⁄2 15 10 0 10 10 10 30 0
I g,qq,rr,ss g,ee,qq,rr,ss g,qq,rr,ss g,qq,ss,tt b,g,qq,ss,tt g g,qq g,qq g,qq d
Japan JA 10 10 10 10 5 0 0 0 0 30 0
g g,ee g g,ff b,g,ff g g g g d,f
I
Kazakstan KZ 10 10 10 15 5 0 10 10 10 30 0
I g g g g b,g g g g g d,f
Korea, Rep. of KS 12 12 12 15 10 0 15 10 10 30 0
I g,kk g,ee,kk g,kk g,w b,g,w g g,aa g g d,f
Latvia LG 10 10 10 15 5 0 5 10 10 30 0
I g,kk g,ee,kk g,kk g,w b,g,w g g,aa g g d,f
Lithuania LH 10 10 10 15 5 0 5 10 10 30 0
g,k g,ee,k g,k g,w b,g,w g g g g d
I
Luxembourg LU 0 0 0 15 5 0 0 0 0 30 0
g,ee,hh g g,mm,pp g,mm,oo,pp g g g g d
g,hh
I
Mexico MX 15 15 15 10 5 0 10 10 10 30 0
g g g g b,g g h g g d,f
I
Morocco MO 15 15 15 15 10 0 10 10 10 30 0
g g g g,xx b,g,oo,xx g g,cc g d,f,ii
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I
Netherlands NL 0 0 0 15 5 0 0 0 0 30 0
I g g g g g g g g g d
New Zealand NZ 10 10 10 15 15 0 10 10 10 30 0
g g g g g g g h g d,f
I
Norway NO 0 0 0 15 15 0 0 0 0 30 0

Page 37
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Page 38
Table 1. Withholding Tax Rates on Income Other Than Personal Service Income Under Chapter 3, Internal Revenue Code, and Income Tax
Treaties—For Withholding in 2008 (Continued)
Income code number 1 2 3 6 7 9 10 11 12 13 14
Country of residence of payee Dividends Copyright royaltiesdd
Interest Real
Interest paid to Paid by Qualifying Property
paid by Interest on controlling U.S. for Motion Income and Pensions
U.S. real foreign corpora- direct Indus- Pictures Natural and
obligors property corpora- tions— dividend Capital trial and Resources Annuities
dd dd
Name Code Generaldd mortgages dd tions generala,dd ratea,dd Gainse,u,dd Royalties Television Other Royaltiesu
Page 38 of 58 of Publication 515

II b,h h h d,j
Pakistan PK 30 30 30 30 15 30 0 30 0 30 0
I g g g g b,g g g g g q
Philippines RP 15 15 15 25 20 0 15 15 15 30 30
I g g g g b,g g g g g
Poland PL 0 0 0 15 5 0 10 10 10 30 30
I h h,ee h h,w b,h,w g h h h d,f
Portugal PO 10 10 10 15 5 0 10 10 10 30 0
I g g g g g g g g g d,f
Romania RO 10 10 10 10 10 0 15 10 10 30 0
I g g,ee g g,ff b,g,ff g g g g d
Russia RS 0 0 0 10 5 0 0 0 0 30 0
I g g,ee g g,w b,g,w g g g g d,f
Slovak Republic LO 0 0 0 15 5 0 10 0 0 30 0
I g g,ee g g,mm b,g,mm g g g g d,f
Slovenia SI 5 5 5 15 5 0 5 5 5 30 0
I g,jj g,ee,jj g,jj g,w g,w g g g d,l
South Africa SF 0 0 0 15 5 0 0 0 0 30 15
I g g g g,w b,g,w g g,x g,x g,x d,f
Spain SP 10 10 10 15 10 0 8 8 5 30 0
I g,jj g,ee,jj g,jj g,ww g,ww g,uu g g g,vv d,t
Sri Lanka CE 10 10 10 15 15 0 10 10 10 30 0
I g g,ee g g,ss,tt b,g,oo,ss,tt g g g g d
Sweden SW 0 0 0 15 5 0 0 0 0 30 0
I g,y g,y,ee g,y g,w g,w g g g d
Switzerland SZ 0 0 0 15 5 0 0 0 0 30 0
I g,z g,z,ee g,z g,w g,w g,aa g g,i d,f
Thailand TH 15 15 15 15 10 30 8 5 15 30 0
I g g d,f
Trinidad & Tobago TD 30 30 30 30 30 30 15 30 0 30 0
I g g g g,w b,g,w g g,aa g g f
Tunisia TS 15 15 15 20 14 0 10 15 15 30 0
I g,m,z g,m,z,ee g,m,z g,w g,w g g,aa g g d
Turkey TU 15 15 15 20 15 0 5 10 10 30 0
I g g,ee g g,ff b,g,ff g g g g d
Ukraine UP 0 0 0 15 5 0 10 10 10 30 0
I g,kk,qq g,ee,kk,qq g,kk,qq g,qq g,oo,qq g g,qq g,qq g,qq d,f
United Kingdom UK 0 0 0 15 5 0 0 0 0 30 0
g,kk,ll g,ee,kk,ll g,kk,ll g,mm b,g,mm g g,aa g g d,t
15
I
Venezuela VE 10 10 10 5 0 5 10 10 30 0
I
Other countries 30 30 30 30 30 30 30 30 30 30 30
I
Contains a Business Profits article.
II
See Article III of the treaty for treatment of business profits.
III
See Article IV of the treaty for treatment of business profits.
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Publication 515 (April 2008)

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 a h
No U.S. tax is imposed on a percentage of any dividend
paid by a U.S. corporation that received at least 80% of
its gross income from an active foreign business for the
3-year period before the dividend is declared. (See
sections 871(i)(2)(B) and 881(d) of the Internal Revenue
Code.)
b
The reduced rate applies to dividends paid by a subsidiary
Publication 515 (April 2008)
to a foreign parent corporation that has the required
percentage of stock ownership. In some cases, the income
of the subsidiary must meet certain requirements (e.g. a
certain percentage of its total income must consist of
income other than dividends and interest). For Italy, the
reduced rate is 10% if the foreign corporation owns 10%
to 50% of the voting stock (for a 12-month period) of the
company paying the dividends. For Japan, dividends paid
by a more than 50% owned corporate subsidiary are
exempt if certain conditions are met.
c the profits of the issuer or one of its associated enterprises.
Generally, if the person was receiving pension distributions
before March 31, 2000, the distributions continue to be
exempt from U.S. tax.
d States. The reduced rate applies if the distribution is not
Exemption does not apply to U.S. Government (federal,
state, or local) pensions and annuities; a 30% rate applies
to these pensions and annuities. U.S. government
pensions paid to an individual who is both a resident and
national of Bangladesh, Belgium, China, Denmark, Estonia,
Finland, Germany, Hungary, India, Ireland, Italy, Japan,
Latvia, Lithuania, Luxembourg, Mexico, The Netherlands,
Portugal, Russia, Slovenia, South Africa, Spain,
Switzerland, Thailand, Turkey, the United Kingdom, or
Venezuela are exempt from U.S. tax. U.S. government
pensions paid to an individual who is both a resident and
citizen of Kazakstan, New Zealand, or Sweden are exempt
from U.S. tax.
e The exemption does not apply if the recipient was a
No withholding is required on capital gains other than
those listed earlier under Capital Gains, even if the gain is
subject to U.S. tax.
f
Includes alimony.
g
The exemption or reduction in rate does not apply if the
recipient has a permanent establishment in the United
States and the property giving rise to the income is
effectively connected with this permanent establishment.
Under certain treaties, the exemption or reduction in rate
also does not apply if the property giving rise to the income
is effectively connected with a fixed base in the United
States from which the recipient performs independent
personal services. Even with the treaty, if the income is not
effectively connected with a trade or business in the United
States by the recipient, the recipient will be considered as
not having a permanent establishment in the United States
under IRC section 894(b).
Page 39
The exemption or reduction in rate does not apply if the
recipient is engaged in a trade or business in the United
States through a permanent establishment that is in the
United States. However, if the income is not effectively
connected with a trade or business in the United States
by the recipient, the recipient will be considered as not
having a permanent establishment in the United States for
the purpose of applying the reduced treaty rate to that item
of income. IRC section 894(b).
i
The rate is 5% for royalties on the use of any copyright of
literary, artistic, or scientific work, including software.
j
Exemption is not available when paid from a fund, under
an employees’ pension or annuity plan, if contributions to
it are deductible under U.S. tax laws in determining taxable
income of the employer.
k Tax imposed on 70% of gross royalties for rentals of
The rate is 15% for interest determined with reference to
l The rate in column 6 applies to dividends paid by a
Annuities that were purchased while the annuitant was not
a resident of the United States are not taxable in the United
subject to a penalty for early withdrawal.
m dividends is an individual holding less than a 10% interest
Contingent interest that does not qualify as portfolio
interest is treated as a dividend and is subject to the rates
under income codes 6 and 7, as appropriate.
n
The exemption applies only to interest on credits, loans,
and other indebtedness connected with the financing of
trade between the United States and C.I.S. member
countries. It does not include interest from the conduct of
a general banking business.
o
The exemption applies only to gains from the sale or other
disposition of property acquired by gift or inheritance.
p
resident of the United States when the pension was earned
or when the annuity was purchased.
q
Annuities paid in return for other than the recipient’s
personal services are exempt. For Bangladesh, the
exemption does not apply to an annuity received for
services rendered.
r
Generally, if the property was owned by the Canadian
resident on September 26, 1980, not as part of the
business property of a permanent establishment or fixed
base in the U.S., the taxable gain is limited to the
appreciation after 1984. Capital gains on personal property
not belonging to a permanent establishment or fixed base
s
of the taxpayer in the U.S. are exempt.
The reduced rate for royalties with respect to tangible
personal property is 7%.
t
Does not apply to annuities. For Denmark, annuities are
exempt.
u
Withholding at a special rate may be required on the
disposition of U.S. real property interests. See U.S. Real
Property Interest earlier in this publication.
v
Page 39 of 58 of Publication 515
industrial or scientific equipment.
w
regulated investment company (RIC) or a real estate
investment trust (REIT). However, that rate applies to
dividends paid by a REIT only if the beneficial owner of the
(25% in the case of Portugal, Spain, Thailand, and Tunisia)
in the REIT.
x
Royalties not taxed at the 5% or 8% rate are taxed at a
10% rate, unless footnote (g) applies.
y
The exemption does not apply to contingent interest that
does not qualify as portfolio interest. Generally, this is
interest based on receipts, sales, income, or changes in
the value of property.
z
The rate is 10% if the interest is paid on a loan granted by
a bank or similar financial institution. For Thailand, the 10%
rate also applies to interest from an arm’s length sale on
credit of equipment, merchandise, or services.
aa
This is the rate for royalties for the use of, or the right to
use, industrial, commercial, and scientific equipment. The
rate for royalties for information concerning industrial,
commercial and scientific know-how is subject to the rate
in column 12, but use Income Code 10 for reporting
purposes.
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11:14 - 23-APR-2008
Page 40
bb
The rate is 5% for interest (a) beneficially owned by a bank
or other financial institution (including an insurance
company) or (b) paid due to a sale on credit of any
industrial, commercial, or scientific equipment, or of any
merchandise to an enterprise.
cc
The exemption does not apply to cinematographic films,
or works on film, tape, or other means of reproduction for
use in radio or television broadcasting.
dd
Under some treaties, the reduced rates of withholding may
not apply to a foreign corporation unless a minimum
percentage of its owners are citizens or residents of the
United States or the treaty country.
ee
Exemption or reduced rate does not apply to an excess
inclusion for a residual interest in a real estate mortgage
investment conduit (REMIC).
ff
The rate in column 6 applies to dividends paid by a
regulated investment company (RIC). Dividends paid by a
real estate investment trust (REIT) are subject to a 30%
rate.
gg
Under the treaty the exemption or reduction in rate does
not apply if the recipient has a permanent establishment
in the U.S. and the income is effectively connected with
this permanent establishment. Instead, tax is not withheld
at source and the provisions of Article 8 (Business Profits)
apply. Additionally, even if interest income is not effectively
connected with a U.S. permanent establishment, the
recipient may choose to treat net interest income as
industrial or commercial profits subject to Article 8 of the
treaty.
hh
The rate is 4.9% for interest derived from (1) loans granted
by banks and insurance companies and (2) bonds or
securities that are regularly and substantially traded on a
recognized securities market. The rate is 10% for interest
not described in the preceding sentence and paid (i) by
banks or (ii) by the buyer of machinery and equipment to
the seller due to a sale on credit.
ii
The exemption does not apply if (1) the recipient was a
U.S. resident during the 5-year period before the date of
payment, (2) the amount was paid for employment
performed in the United States, and (3) the amount is not
a periodic payment, or is a lump-sum payment in lieu of a
right to receive an annuity.
Publication 515 (April 2008)
jj
The rate is 15% (30% for Germany) for contingent interest
that does not qualify as portfolio interest. Generally, this is
interest based on receipts, sales, income, or changes in
the value of property.
kk
The rate is 15% for interest determined with reference to
(a) receipts, sales, income, profits or other cash flow of the
debtor or a related person, (b) any change in the value of
any property of the debtor or a related person, or (c) any
dividend, partnership distribution or similar payment made
by the debtor to a related party.
ll
The rate is 4.95% if the interest is beneficially owned by a
financial institution (including an insurance company).
mm
The rate in column 6 applies to dividends paid by a
regulated investment company (RIC) or real estate
investment trust (REIT). However, that rate applies to
dividends paid by a REIT only if the beneficial owner of the
dividends is (a) an individual holding not more than a 10%
interest in the REIT, (b) a person holding not more than 5%
of any class of the REIT’s stock and the dividends are paid
on stock that is publicly traded, or (c) a person holding not
more than a 10% interest in the REIT and the REIT is
diversified.
nn
Interest paid to a financial institution is exempt.
oo
Dividends paid by an 80%-owned corporate subsidiary are
exempt if certain conditions are met.
pp
Dividends paid to a trust, company, or other organization
operated exclusively to administer or provide pension,
retirement, or other employee benefits generally are
qq
exempt if certain conditions are met.
Exemption or reduced rate does not apply to amount paid
under, or as part of, a conduit arrangement.
rr
Interest is exempt if (a) paid to certain financial institutions,
or (b) paid on indebtedness from the sale on credit of
equipment or merchandise.
ss
Amounts paid to a pension fund that are not derived from
the carrying on of a business, directly or indirectly, by the
fund are exempt. This includes amounts paid by a REIT
only if the conditions in footnote tt are met. For Sweden,
the pension fund must not sell or make a contract to sell
the holding from which the dividend is derived within 2
months of the date the pension fund acquired the holding.
tt
The rate in column 6 applies to dividends paid by a
regulated investment company (RIC) or real estate
investment trust (REIT). However, that rate applies to
dividends paid by a REIT only if the beneficial owner of the
dividends is (a) an individual or a pension fund holding not
more than a 10% interest in the REIT, (b) a person holding
not more than 5% of any class of the REIT’s stock and the
dividends are paid on stock that is publicly traded, or (c)
a person holding not more than a 10% interest in the REIT
and the REIT is diversified. Dividends paid to a pension
fund from a RIC, or a REIT that meets the above conditions,
are exempt. For Sweden, the pension fund must also
satisfy the requirements in footnote ss.
Page 40 of 58 of Publication 515
uu
The exemption does not apply to a sale of a U.S.
company’s stock representing ownership of 50% or more.
vv
The rate is 5% for the rental of tangible personal property.
ww
The rate applies to dividends paid by a real estate
investment trust (REIT) only if the beneficial owner of the
dividends is (a) an individual holding less than a 10%
interest in the REIT, (b) a person holding not more than 5%
of any class of the REIT’s stock and the dividend is paid
on stock that is publicly traded, or (c) a person holding not
more than a 10% interest in the REIT and the REIT is
diversified.
xx
The rate in column 6 applies to dividends paid by a
regulated investment company (RIC) or real estate
investment trust (REIT). However, that rate applies to a
dividends paid by a REIT only if the beneficial owner of the
dividends is (a) an individual holding not more than a 25%
interest in the REIT, (b) a person holding not more than 5%
of any class of the REIT’s stock and the dividends are paid
on stock that is publicly traded, (c) a person holding not
more than a 10% interest in the REIT and the REIT is
diversified, or (d) a Dutch beleggingsinstelling.
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11:14 - 23-APR-2008
 Table 2. Compensation for Personal Services Performed in United States Exempt from Withholding and U.S. Income Tax Under Income Tax Treaties
Category of Personal Services Maximum Maximum
Presence Amount of Treaty Article
1
Country Code Purpose in U.S. Required Employer or Payer Compensation Citation
(1) (2) (3) (4) (5) (6) (7)
Australia 16 Independent personal services7,22 183 days Any contractor No limit 14
20 Public entertainment22 183 days Any contractor $10,000 17
17 Dependent personal services17 183 days Any foreign resident No limit 15
20 Public entertainment17 183 days Any foreign resident $10,000 17
19 Studying and training:
Remittances or allowances11 No limit Any foreign resident No limit 20

Publication 515 (April 2008)

Austria 16 Independent personal services7 No limit Any contractor No limit 14
20 Public entertainment22 No limit Any contractor $20,00025 17
17 Dependent personal services17 183 days Any foreign resident No limit 15
20 Public entertainment22 No limit Any U.S. or foreign resident $20,00025 17
19 Studying and training:11
Remittances or allowances 3 years45 Any foreign resident No limit 20
Bangladesh 15 Scholarship or fellowship grant4 2 years45 Any U.S. or foreign resident5 No limit 21(2)
16 Independent personal services7,22 183 days Any contractor No limit 15
20 Public entertainment22 No limit Any contractor $10,00030 18
Page 41 of 58 of Publication 515

17 Dependent personal services17 183 days Any foreign resident No limit 16

20 Public entertainment22 No limit Any contractor $10,00030 18
18 Teaching or research4 2 years Any U.S. or foreign resident No limit 21(1)
19 Studying and training:4
Remittances or allowances 2 years45 Any foreign resident No limit 21(2)
Compensation during study or training 2 years45 Any U.S. or foreign resident $8,000 p.a. 21(2)
Barbados 16 Independent personal services7,8,22 89 days Any foreign contractor No limit 14
89 days Any U.S. contractor $5,000 p.a. 14
22
20 Public entertainment No limit Any contractor $250 per day 6
or $4,000 p.a. 17
17 Dependent personal services8,17 183 days Any foreign resident $5,000 p.a. 15
20 Public entertainment No limit Any U.S. or foreign resident $250 per day 6 17
19 Studying and training:23 or $4,000 p.a. 17
Remittances or allowances11 No limit Any foreign resident No limit 20
Belgium (old treaty) 15 Scholarship or fellowship grant15 5 years Any U.S. or foreign resident5 No limit 21(1)
16 Independent personal services7,22 182 days Any contractor No limit 14(2)(a)(b)
20 Public entertainment22 90 days Any contractor $3,000 14(2)(c)
17 Dependent personal services17 182 days Belgian resident18 No limit 15
18 Teaching4 2 years U.S. educational institution No limit 20
19 Studying and training:
Remittances or allowances 5 years Any foreign resident No limit 21(1)
Compensation during training 5 years Other foreign or U.S. resident $2,000 p.a. 21(1)
12 consec. mo. Belgian resident $5,000 21(2)(b)
Compensation while gaining experience2 12 consec. mo. Belgian resident $5,000 21(2)(a)
Compensation under U.S.
Government program 1 year U.S. Government or its contractor $10,000 21(3)
Belgium (new treaty) 16 Independent personal services53
17 Dependent personal services12,17 183 days Any foreign resident No limit 14
20 Public entertainment No limit Any U.S. or foreign resident $20,000 p.a.25 16
18 Teaching4 2 years U.S. educational or research institution No limit 19(2)
19 Studying and training:11
Remittances or allowances No limit52 Any foreign resident No limit 19(1)(a)
Compensation during study or training No limit52 Any U.S. or foreign resident $9,000 p.a. 19(1)(b)
Canada 16 Independent personal services7,22 No limit Any contractor No limit XIV
20 Public entertainment No limit Any contractor $15,000 p.a. 25 16
17 Dependent personal services No limit Any U.S. or foreign resident $10,000 XV
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183 days Any foreign resident17 No limit

20 Public entertainment54 No limit Any U.S. or foreign resident $15,000 p.a.25 16
19 Studying and training:
Remittances or allowances11 No limit Any foreign resident No limit XX

Page 41
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 Table 2. ( Continued)

Page 42
Category of Personal Services Maximum Maximum
Presence Amount of Treaty Article
Country Code1 Purpose in U.S. Required Employer or Payer Compensation Citation
(1) (2) (3) (4) (5) (6) (7)

China, People’s Rep. of 15 Scholarship or fellowship grant15 No limit Any U.S. or foreign resident5 No limit 20(b)
16 Independent personal services7,22 183 days Any contractor No limit 13
20 Public entertainment29 No limit Any contractor No limit 16
17 Dependent personal services8,17 183 days Any foreign resident No limit 14
20 Public entertainment29 No limit Any U.S. or foreign resident No limit 16
18 Teaching4 3 years U.S. educational or research institute No limit 19
19 Studying and training:
Remittances or allowances No limit Any foreign resident No limit 20(a)
Compensation during training or while
gaining experience No limit Any U.S. or foreign resident $5,000 p.a. 20(c)
Commonwealth of 15 Scholarship or fellowship grant 5 years Any U.S. or foreign resident Limited VI(1)
Independent States 16 Independent personal services22 183 days Any U.S. or foreign contractor No limit VI(2)
17 Dependent personal services 183 days Any U.S. or foreign resident No limit VI(2)
18 Teaching4,20 2 years U.S. educational or scientific institution No limit VI(1)
Page 42 of 58 of Publication 515

19 Studying and training:

Remittances or allowances 5 years Any U.S. or foreign resident Limited VI(1)
Compensation while gaining experience 1 year C.I.S. resident No limit21 VI(1)
Compensation under U.S.
Government program 1 year Any U.S. or foreign resident No limit VI(1)
Cyprus 15 Scholarship or fellowship grant15 Generally, 5
years Any U.S. or foreign resident5 No limit 21(1)
16 Independent personal services7,22 182 days Any contractor No limit 17
20 Public entertainment22 No limit Any contractor $500 per day or
$5,000 p.a.6 19(1)
17 Dependent personal services17 182 days Any foreign resident No limit 18
Directors’ fees No limit U.S. corporation No limit24 20
20 Public entertainment No limit Any U.S. or foreign resident $500 per day or
$5,000 p.a.6 19(1)
19 Studying and training:
Remittances or allowances Generally, 5
years Any foreign resident No limit 21(1)
Compensation during training Generally, 5
years Any U.S. or foreign resident $2,000 p.a. 21(1)
Compensation while gaining experience2 1 year Cyprus resident $7,500 21(2)
Compensation under U.S.
Government program 1 year U.S. Government or its contractor $10,000 21(3)
Czech Republic 15 Scholarship or fellowship grant4,15 5 years Any U.S. or foreign resident5 No limit 21(1)
16 Independent personal services7,22 183 days Any contractor No limit 14
20 Public entertainment22 183 days Any contractor $20,000 p.a.30 18
17 Dependent personal services8,17 183 days Any foreign resident No limit 15
20 Public entertainment 183 days Any foreign resident $20,000 p.a.30 18
18 Teaching4,35 2 years Any U.S. educational or research
4
institution No limit 21(5)
19 Studying and training:
Remittances and allowances 5 years Any foreign resident No limit 21(1)
Compensation during training 5 years Any U.S. or foreign resident $5,000 p.a. 21(1)
Compensation while gaining experience2 12 consec. mos. Czech resident $8,000 21(2)
Compensation under U.S.
Government program 1 year U.S. Government $10,000 21(3)
Denmark 16 Independent personal services722
No limit Any contractor No limit 25
14
20 Public entertainment 8,17
No limit Any contractor $20,000 p.a. 17
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17 Dependent personal services 22

183 days Any foreign resident No limit 25
15
20 Public entertainment4,11
183 days Any foreign resident $20,000 p.a. 17
19 Studying and training: 45
Remittances or allowances 3 years Any foreign resident No limit 20

Publication 515 (April 2008)

11:14 - 23-APR-2008
 Table 2. ( Continued)
Category of Personal Services Maximum Maximum
Presence Amount of Treaty Article
1
Country Code Purpose in U.S. Required Employer or Payer Compensation Citation
(1) (2) (3) (4) (5) (6) (7)
Egypt 15 Scholarship or fellowship grant15 Generally, 5 years Any U.S. or foreign resident5 No limit 23(1)
16 Independent personal services22 89 days Any foreign contractor No limit 15
20 Public entertainment22 No limit Any contractor $400 per day 17
17 Dependent personal services16,17 89 days Egyptian resident No limit 16

Publication 515 (April 2008)

20 Public entertainment No limit Any U.S. or foreign resident $400 per day 17
18 Teaching4 2 years U.S. educational institution No limit 22
19 Studying and training:
Remittances or allowances Generally, 5 years Any foreign resident No limit 22(1)
Compensation during training Generally, 5 years U.S. or any foreign resident $3,000 p.a. 22(1)
Compensation while gaining experience2 12 consec. mos. Egyptian resident $7,500 23(2)
Compensation while under U.S.
Government program 1 year U.S. Government or its contractor $10,000 23(3)
Estonia 15 Scholarship or fellowship grants4 5 years Any U.S. or foreign resident5 No limit 20(1)
16 Independent personal services7 183 days Any contractor No limit 14
Page 43 of 58 of Publication 515

20 Public entertainment22 No limit Any contractor $20,00030 17

17 Dependent personal services8,17 183 days Any foreign resident No limit 15
20 Public entertainment22 No limit Any U.S. or foreign resident $20,00030 17
19 Studying and training:4
Remittances or allowances 5 years Any foreign resident No limit 20(1)
Compensation during training 12 consec. mos. Estonian resident $8,000 20(2)
Compensation while gaining 5 years Other foreign or U.S. resident $5,000 p.a. 20(1)
experience2 12 consec. mos. Estonian resident $8,000 20(2)
Compensation under U.S. Gov’t.
program 1 year U.S. Government or its contractor $10,000 20(3)
Finland 16 Independent personal services7,22 No limit Any contractor No limit 14
20 Public entertainment22 No limit Any contractor $20,000 p.a.25 17
17 Dependent personal services17 183 days Any foreign resident No limit 15
20 Public entertainment No limit Any U.S. or foreign resident $20,000 p.a.25 17
19 Studying and training:
Remittances or allowances11 No limit Any foreign resident No limit 20
France 15 Scholarship or fellowship grant15 5 years43 Any U.S. or foreign resident5 No limit 21(1)
16 Independent personal services7,22 No limit Any contractor No limit 14
20 Public entertainment No limit Any contractor $10,00030 17
17 Dependent personal services8,17 183 days Any foreign resident No limit 15
20 Public entertainment No limit Any U.S. or foreign resident $10,00030 17
18 Teaching4,44 2 years43 U.S. educational or research institution No limit 20
19 Studying and training:4
Remittances or allowances 5 years43 Any foreign resident No limit 21(1)
Compensation during study or
training 12 consec. mos. French resident $8,000 21(2)
5 years43 Other foreign or U.S. resident $5,000 p.a. 21(1)
2
Compensation while gaining experience 12 consec. mos. French resident $8,000 21(2)
Germany (old treaty) 15 Scholarship or fellowship grant No limit Any U.S. or foreign resident5 No limit 20(3)
16 Independent personal services7,22 No limit Any contractor No limit 14
20 Public entertainment7,22 No limit Any contractor $20,000 p.a.30 17
17 Dependent personal services12,17 183 days Any foreign resident No limit 15
20 Public entertainment17 183 days Any foreign resident $20,000 p.a.30 17
18 Teaching4 2 years U.S. educational or research institution No limit 20(1)
19 Studying and training:
Remittances or allowances11 No limit Any foreign resident No limit 20(2)
Compensation during study or training 4 years Any U.S. or foreign resident $5,000 p.a. 20(4)
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Compensation while gaining experience2 1 year Any German enterprise or foreign

organization or institution $10,00028 20(5)

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 Table 2. ( Continued)

Page 44
Category of Personal Services Maximum Maximum
Presence Amount of Treaty Article
1
Country Code Purpose in U.S. Required Employer or Payer Compensation Citation
(1) (2) (3) (4) (5) (6) (7)
Germany (as modified) 15 Scholarship or fellowship grant No limit Any U.S. or foreign resident5 No limit 20(3)
16 Independent personal services53
17 Dependent personal services12,17 183 days Any foreign resident No limit 15
20 Public entertainment No limit Any U.S. or foreign resident $20,000 p.a.30 17
18 Teaching4,55 2 years U.S. educational or research institution No limit 20(1)
19 Studying and training:11
Remittances or allowances No limit Any foreign resident No limit 20(2)
Compensation during study or training 4 years Any U.S. or foreign resident $9,000 p.a. 20(4)
Compensation while gaining experience 2 1 year Any foreign resident $10,000 28 20(5)
Greece 16 Independent personal services22 183 days Greek resident contractor No limit X
183 days Other foreign or U.S. resident contractor $10,000 X
17 Dependent personal services 183 days Greek resident No limit X
183 days Other foreign or U.S. resident $10,000 X
18 Teaching 3 years U.S. educational institution No limit XII
Page 44 of 58 of Publication 515

19 Studying and training:

Remittances or allowances No limit Any foreign resident No limit XIII
Hungary 16 Independent personal services7,22 183 days Any contractor No limit 13
17 Dependent personal services17 183 days Any foreign resident No limit 14
18 Teaching4 2 years U.S. educational institution No limit 17
19 Studying and training:23
Remittances or allowances11 No limit Any foreign resident No limit 18(1)
Iceland 15 Scholarship and fellowship grant15 5 years Any U.S. or foreign resident5 No limit 22(1)
16 Independent personal services7,22 182 days Any contractor No limit 18
20 Public entertainment22 90 days Any resident contractor $100 per day 18
17 Dependent personal services17 182 days Iceland resident18 No limit 19
18 Teaching4 2 years U.S. educational institution No limit 21
19 Studying and training:
Remittances or allowances 5 years Any foreign resident No limit 22(1)
Compensation during training 5 years U.S. or any foreign resident $2,000 p.a. 22(1)
Compensation while gaining experience2 12 consec. mo. Iceland resident $5,000 22(2)
Compensation under U.S.
Government program 1 year U.S. Government or its contractor $10,000 22(3)
India 16 Independent personal services7,8,22 89 days Any contractor No limit 15
20 Public entertainment7,22 89 days Any contractor $1,500 p.a.26 18
17 Dependent personal services8,17 183 days Any foreign resident No limit 16
20 Public entertainment17 183 days Any foreign resident $1,500 p.a.26 18
18 Teaching4 2 years U.S. educational institution No limit 22
19 Studying and training:
Remittances or allowances No limit Any foreign resident27 No limit 21(1)
Indonesia 15 Scholarship or fellowship grant15 5 years Any U.S. or foreign resident5 No limit 19(1)
16 Independent personal services7,22 119 days Any contractor No limit 15
20 Public entertainment22 No limit Any contractor $2,000 p.a.25 17
17 Dependent personal services17 119 days Any foreign resident No limit 16
20 Public entertainment No limit Any U.S. or foreign resident $2,000 p.a.25 17
18 Teaching4,44 2 years U.S. educational institution No limit 20
19 Studying and training:
Remittances or allowances 5 years Any foreign resident No limit 19(1)
Compensation during training 5 years Any foreign or U.S. resident $2,000 p.a. 19(1)
Compensation while gaining experience 12 consec. mo. Any U.S. or foreign resident $7,500 19(2)
Ireland 16 Independent personal services7 No limit Any contractor No limit 14
20 Public entertainment22 No limit Any contractor $20,00025 17
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

17 Dependent personal services17,47 183 days Any foreign resident No limit 15

20 Public entertainment22 No limit Any U.S. or foreign resident $20,00025 17
19 Studying and training:11
Remittances or allowances 1 year45 Any foreign resident No limit 20

Publication 515 (April 2008)

11:14 - 23-APR-2008
 Table 2. ( Continued)
Category of Personal Services Maximum Maximum
Presence Amount of Treaty Article
1
Country Code Purpose in U.S. Required Employer or Payer Compensation Citation
(1) (2) (3) (4) (5) (6) (7)
Israel 15 Scholarship or fellowship grant 5 years Any U.S. or foreign resident5 No limit 24(1)

Publication 515 (April 2008)

16 Independent personal services22 182 days Any contractor No limit 16
20 Public entertainment22 No limit Any contractor $400 per day37 18
17 Dependent personal services16, 17 182 days Israeli resident18 No limit 17
20 Public entertainment No limit Any U.S. or foreign resident $400 per day37 18
18 Teaching4,39 2 years U.S. educational institution No limit 23
19 Studying and training:
Remittances or allowances 5 years Any foreign resident No limit 24(1)
Compensation during study or
training 5 years Any U.S. or foreign resident $3,000 p.a. 24(1)
Compensation while gaining experience2 12 consec. mo. Israeli resident $7,500 24(2)
Page 45 of 58 of Publication 515

Compensation under U.S.

Government program 1 year U.S. Government or its contractor $10,000 24(3)
7,8,22
Italy 16 Independent personal services 183 days Any contractor No limit 14
20 Public entertainment22 90 days Any contractor $12,000 p.a.25 17(1)
17 Dependent personal services8,17 183 days Any foreign resident No limit 15
20 Public entertainment 90 days Any U.S. or foreign resident $12,000 p.a.25 17(1)
18 Teaching4 2 years U.S. educational institution No limit 20
19 Studying and training:
Remittances or allowances No limit Any foreign resident No limit 21
Jamaica 16 Independent personal services7,22 89 days Any foreign contractor No limit 14
89 days Any U.S. contractor $5,000 p.a. 14
20 Public entertainment22 No limit Any contractor $400 per day
or $5,000 p.a.6 18
17 Dependent personal services17 183 days Any foreign resident $5,000 p.a. 15
20 Public entertainment No limit Any U.S. or foreign resident $400 per day 6
or $5,000 p.a. 18
Directors’ fees No limit U.S. resident $400 per day6 16
18 Teaching4,44 2 years U.S. educational institution No limit 22
19 Studying and training:23
Remittances or allowances11 No limit Any foreign resident No limit 21(1)
Compensation during study 12 consec. mo. Jamaican resident $7,500 p.a. 21(2)
Compensation while gaining experience2 12 consec. mo. Jamaican resident $7,500 p.a. 21(2)
Japan 16 Independent personal services 8, 53
20 Public entertainment22 No limit Any contractor $10,000 p.a.25 16
17 Dependent personal services8, 17 183 days Any foreign resident No limit 14
20 Public entertainment No limit Any U.S. or foreign resident $10,000 p.a.25 16
18 Teaching4 2 years U.S. educational institution No limit 20
19 Studying and training:
Remittances or allowances 1 year 45 Any foreign resident No limit 19

Kazakstan 15 Scholarship or fellowship grant4,15,41 5 years31 Any U.S. or foreign resident5 No limit 19
16 Independent personal services7 183 days Any contractor No limit 15
17 Dependent personal services17,47 183 days Any foreign resident No limit 16
19 Studying and training:4
Remittances or allowances 5 years Any foreign resident No limit 19
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Page 45
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Page 46
Table 2. ( Continued)
Category of Personal Services Maximum Maximum
Presence Amount of Treaty Article
1
Country Code Purpose in U.S. Required Employer or Payer Compensation Citation
(1) (2) (3) (4) (5) (6) (7)
Korea, Rep. of 15 Scholarship or fellowship grant15 5 years Any U.S. or foreign resident5 No limit 21(1)
16 Independent personal services7,22 182 days Any contractor $3,000 p.a. 18
17 Dependent personal services17 182 days Korean resident18 $3,000 p.a. 19
18 Teaching4 2 years U.S. educational institution No limit 20
19 Studying and training:
Remittances or allowances 5 years Any foreign resident No limit 21(1)
Compensation during training 5 years Any foreign or U.S. resident $2,000 p.a. 21(1)
Compensation while gaining experience2 1 year Korean resident $5,000 21(2)
Compensation under U.S.
Government program 1 year U.S. Government or its contractor $10,000 21(3)
Latvia 15 Scholarship or fellowship grants4 5 years Any U.S. or foreign resident5 No limit 20(1)
16 Independent personal services7 183 days Any contractor No limit 14
Page 46 of 58 of Publication 515

20 Public entertainment22 No limit Any contractor $20,00030 17

17 Dependent personal services8,17 183 days Any foreign resident No limit 15
20 Public entertainment22 No limit Any U.S. or foreign resident $20,00030 17
19 Studying and training:4
Remittances or allowances 5 years Any foreign resident No limit 20(1)
Compensation during training 12 consec. mos. Latvian resident $8,000 20(2)
5 years Other foreign or U.S. resident $5,000 p.a. 20(1)
Compensation2 while gaining
experience 12 consec. mos. Latvian resident $8,000 20(2)
Compensation under U.S. Gov’t.
program 1 year U.S. Government or its contractor $10,000 20(3)
Lithuania 15 Scholarship or fellowship grants4 5 years Any U.S. or foreign resident5 No limit 20(1)
16 Independent personal services7 183 days Any contractor No limit 14
20 Public entertainment22 No limit Any contractor $20,00030 17
17 Dependent personal services8,17 183 days Any foreign resident No limit 15
20 Public entertainment22 No limit Any U.S. or foreign resident $20,00030 17
19 Studying and training:4
Remittances or allowances 5 years Any foreign resident No limit 20(1)
Compensation during training 12 consec. mos. Lithuanian resident $8,000 20(2)
5 years Other foreign or U.S. resident $5,000 p.a. 20(1)
Compensation2 while gaining
experience 12 consec. mos. Lithuanian resident $8,000 20(2)
Compensation under U.S. Gov’t.
program 1 year U.S. Government or its contractor $10,000 20(3)
7
Luxembourg 16 Independent personal services No limit Any contractor No limit 15
20 Public entertainment22 No limit Any contractor $10,00025 18
17 Dependent personal services12, 17 183 days Any foreign resident No limit 16
20 Public entertainment22 No limit Any foreign resident $10,00025 18
18 Teaching9 2 years Any U.S. or foreign resident No limit 21(2)
19 Studying and training:11
Remittances or allowances 2 years45 Any U.S. or foreign resident No limit 21(1)
Mexico 16 Independent personal services7,22 183 days Any contractor No limit 14
20 Public entertainment22 No limit Any contractor $3,000 p.a.30 18
17 Dependent personal services17,47 183 days Any foreign resident No limit 15
20 Public entertainment No limit Any U.S. or foreign resident $3,000 p.a.30 18
19 Studying and training:
Remittances and allowances No limit Any foreign resident No limit 21
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Publication 515 (April 2008)

11:14 - 23-APR-2008
 Table 2. ( Continued)
Category of Personal Services Maximum Maximum
Presence Amount of Treaty Article
1
Country Code Purpose in U.S. Required Employer or Payer Compensation Citation
(1) (2) (3) (4) (5) (6) (7)

Publication 515 (April 2008)

Morocco 15 Scholarship or fellowship grant15 No limit Any U.S. or foreign resident5 No limit 18
16 Independent personal services7,22 182 days Any contractor13 $5,000 14
17 Dependent personal services17 182 days Moroccan resident13,18 No limit 15
19 Studying and training:5
Remittances or allowances 5 years Any foreign resident No limit 18
Compensation during training 5 years U.S. or any foreign resident $2,000 p.a. 18
Netherlands 15 Scholarship or fellowship grant15,33 3 years Any U.S. or foreign resident5 No limit 22(2)
16 Independent personal services7,22 No limit Any contractor No limit 15
20 Public entertainment22 No limit Any contractor $10,000 p.a.30 18
17 Dependent personal services17,47 183 days Any foreign resident No limit 16
Page 47 of 58 of Publication 515

20 Public entertainment 183 days Any foreign resident $10,000 p.a.30 18

18 Teaching4,34 2 years U.S. educational institution No limit 21(1)
19 Studying and training:33
Remittances or allowances No limit Any foreign resident No limit 22(1)
Compensation while gaining experience No limit Any U.S. or foreign resident $2,000 p.a. 22(1)
Compensation while recipient of
scholarship or fellowship grant 3 years Any U.S. or foreign resident $2,000 p.a.36 22(2)
New Zealand 16 Independent personal services7,22 183 days Any contractor No limit 14
20 Public entertainment22 183 days Any contractor $10,00025 17
17 Dependent personal services17 183 days Any foreign resident No limit 15
20 Public entertainment17 183 days Any foreign resident $10,00025 17
19 Studying and training:
Remittances or allowances11 No limit Any foreign resident No limit 20
Norway 15 Scholarship or fellowship grant15 5 years Any U.S. or foreign resident5 No limit 16(1)
16 Independent personal services7,22 182 days Any resident contractor No limit 13
20 Public entertainment22 90 days Any resident contractor $10,000 p.a. 13
17 Dependent personal services17 182 days Norwegian resident18 No limit 14
18 Teaching4 2 years U.S. educational institution No limit 15
19 Studying and training:
Remittances or allowances 5 years Any foreign resident No limit 16(1)
Compensation during training 5 years U.S. or any foreign resident $2,000 p.a. 16(1)
Compensation while gaining experience2 12 consec. mo. Norwegian resident $5,000 16(2)
Compensation under U.S.
Government program 1 year U.S. Government or its contractor $10,000 16(3)
Pakistan 15 Scholarship or fellowship grant15 No limit Pakistani nonprofit organization No limit XIII(1)
16 Independent personal services16,22 183 days Pakistani resident contractor No limit XI
17 Dependent personal services16 183 days Pakistani resident No limit XI
18 Teaching 2 years U.S. educational institution No limit XII
19 Studying and training:
Remittances or allowances No limit Any foreign resident No limit XIII(1)
Compensation during training No limit U.S. or any foreign resident $5,000 p.a. XIII(1)
Compensation while gaining experience2 1 year Pakistani resident $6,000 XIII(2)
Compensation under U.S.
Government program No limit U.S. Government, its contractor, or any
foreign resident employer $10,000 XIII(3)
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Page 47
11:14 - 23-APR-2008
Page 48
Table 2. ( Continued)
Category of Personal Services Maximum Maximum
Presence Amount of Treaty Article
1
Country Code Purpose in U.S. Required Employer or Payer Compensation Citation
(1) (2) (3) (4) (5) (6) (7)
Philippines 15 Scholarship or fellowship grant15 5 years Any U.S. or foreign resident5 No limit 22(1)
16 Independent personal services7,22 89 days Any foreign contractor No limit 15
89 days Any U.S. contractor $10,000 p.a. 15
20 Public entertainment22 No limit Any contractor $100 per day
or $3,000 p.a. 17
17 Dependent personal services17 89 days Any Philippines resident18 No limit 16
20 Public entertainment No limit Any U.S. or foreign resident $100 per day
or $3,000 p.a. 17
18 Teaching4,38 2 years U.S. educational institution No limit 21, 22(4)
19 Studying and training:
Remittances or allowances 5 years Any foreign resident No limit 22(1)
Compensation during study 5 years Any U.S. or foreign resident $3,000 p.a. 22(1)
Compensation while gaining experience2 12 consec. mo. Philippines resident $7,500 p.a. 22(2)
Compensation under U.S.
Page 48 of 58 of Publication 515

Government program 1 year U.S. Government or its contractor $10,000 p.a. 22(3)
Poland 15 Scholarship or fellowship grant15 5 years Any U.S. or foreign resident5 No limit 18(1)
16 Independent personal services22 182 days Any contractor No limit 15
17 Dependent personal services17 182 days Any foreign resident No limit 16
18 Teaching4 2 years U.S. educational institution No limit 17
19 Studying and training:
Remittances or allowances 5 years Any foreign resident No limit 18(1)
Compensation during training 5 years U.S. or any foreign resident $2,000 p.a. 18(1)
Compensation while gaining experience2 1 year Polish resident $5,000 18(2)
Compensation under U.S.
Government program 1 year U.S. Government or its contractor $10,000 18(3)
Portugal 15 Scholarship or fellowship grant15 5 years Any U.S. or foreign resident5 No limit 23(1)
16 Independent personal services7,22 182 days Any contractor No limit 15
20 Public entertainment22 No limit Any contractor $10,000 p.a.30 19
17 Dependent personal services8,17 183 days Any foreign resident No limit 16
20 Public entertainment No limit Any U.S. or foreign resident $10,000 p.a.30 19
18 Teaching4,42 2 years U.S. educational or research institution No limit 22
19 Studying and training:4
Remittances or allowances 5 years Any foreign resident No limit 23(1)
Compensation during training 5 years Any foreign or U.S. resident $5,000 p.a. 23(1)
12 consec. mos. Portuguese resident $8,000 23(2)
Compensation while gaining experience2 12 consec. mos. Portuguese resident $8,000 23(2)
Romania 15 Scholarship or fellowship grant15 5 years Any U.S. or foreign resident5 No limit 20(1)
16 Independent personal services22 182 days Any contractor No limit 14
20 Public entertainment22 90 days Any contractor $3,000 14
17 Dependent personal services17 182 days Romanian resident No limit 15
20 Public entertainment 89 days Romanian resident $2,999.99 15
18 Teaching4 2 years U.S. educational institution No limit 19
19 Studying and training:
Remittances or allowances 5 years Any foreign resident No limit 20(1)
Compensation during training 5 years U.S. or any foreign resident $2,000 p.a. 20(1)
Compensation while gaining experience2 1 year Romanian resident $5,000 20(2)
Compensation while under U.S.
Government program 1 year U.S. Government or its contractor $10,000 20(3)
Russia 15 Scholarship or fellowship grant4,15,41 5 years31 Any U.S. or foreign resident5 No limit 18
16 Independent personal services7,22 183 days Any contractor No limit 13
17 Dependent personal services8,17,32 183 days Any foreign resident No limit 14
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

19 Studying and training:4

Remittances and allowances 5 years31 Any foreign resident No limit 18

Publication 515 (April 2008)

11:14 - 23-APR-2008
 Table 2. ( Continued)
Category of Personal Services Maximum Maximum
Presence Amount of Treaty Article
1
Country Code Purpose in U.S. Required Employer or Payer Compensation Citation
(1) (2) (3) (4) (5) (6) (7)
Slovak Republic 15 Scholarship or fellowship grant4,15 5 years Any U.S. or foreign resident5 No limit 21(1)
16 Independent personal services7,22 183 days Any contractor No limit 14
20 Public entertainment22 183 days Any contractor $20,000 p.a.30 18
17 Dependent personal services12,17 183 days Any foreign resident No limit 15
20 Public entertainment 183 days Any foreign resident $20,000 p.a.30 18
18 Teaching4,35 2 years Any U.S. educational or research institution No limit 21(5)

Publication 515 (April 2008)

19 Studying and training:4
Remittances and allowances 5 years Any foreign resident No limit 21(1)
Compensation during training 5 years Any U.S. or foreign resident $5,000 p.a. 21(1)
Compensation while gaining experience2 12 consec. mos. Slovak resident $8,000 21(2)
Compensation under U.S.
Government program 1 year U.S. Government $10,000 21(3)
Slovenia 15 Scholarship or fellowship grant4 5 years10 Any U.S. or foreign resident5 No limit 20(1)
16 Independent personal services7 No limit Any contractor No limit 14
20 Public entertainment22 No limit Any contractor $15,000 p.a.51 17
17 Dependent personal services12,17 183 days Any foreign resident No limit 15
Page 49 of 58 of Publication 515

20 Public entertainment22 No limit Any U.S. or foreign resident $15,000 p.a.51 17

18 Teaching or research4 2 years40 Any U.S. or foreign resident No limit 20(3)
19 Studying and training:4
Remittances or allowances 5 years10 Any foreign resident No limit 20(1)
Compensation during training 5 years10 Any U.S. or foreign resident $5,000 p.a. 20(1)
Compensation while gaining experience2 12 mo. Slovenian resident $8,000 20(2)
So. Africa 16 Independent personal services7,22 183 days Any contractor No limit 14
20 Public entertainment22 No limit Any contractor $7,50030 17
17 Dependent personal services12,17 183 days Any foreign resident No limit 15
20 Public entertainment22 No limit Any U.S. or foreign resident $7,50030 17
19 Studying and training:11
Remittances or allowances 1 year45 Any foreign resident No limit 20
Spain 15 Scholarship or fellowship grant4,15 5 years Any U.S. or foreign resident5 No limit 22(1)
16 Independent personal services7,22 No limit Any contractor No limit 15
20 Public entertainment22 No limit Any contractor $10,000 p.a.30 19
17 Dependent personal services17 183 days Any foreign resident No limit 16
20 Public entertainment No limit Any U.S. or foreign resident $10,000 p.a.30 19
19 Studying and training:4
Remittances or allowances 5 years Any foreign resident No limit 22(1)
Compensation during training 5 years Any U.S. or foreign resident $5,000 p.a. 22(1)
Compensation while gaining experience2 12 consec. mo. Spanish resident $8,000 22(2)
Sri Lanka 16 Independent personal services 7,12 183 days Any contractor No limit 15
20 Public entertainment7 183 days Any contractor $6,000 p.a.51 18
17 Dependent personal services12,17 183 days Any foreign resident No limit 16
20 Public entertainment17 183 days Any foreign resident $6,000 p.a.51 18
19 Studying and training:
Remittances or allowances11 No limit Any foreign resident No limit 21(1)
Compensation while gaining experience2 1 year Sri Lankan resident19 $6,000 21(2)
Sweden 16 Independent personal services7 No limit Any contractor No limit 14
20 Public entertainment No limit Any contractor $6,00025 18
17 Dependent personal services12,17 183 days Any foreign resident No limit 15
20 Public entertainment No limit Any U.S. or foreign resident $6,00025 18
19 Studying and training:
Remittances or allowances11 No limit Any foreign resident No limit 21
Switzerland 16 Independent personal services7 No limit Any contractor No limit 14
20 Public entertainment22 No limit Any contractor $10,00025 17
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

17 Dependent personal services8,17 183 days Any foreign resident No limit 15

20 Public entertainment22 No limit Any U.S. or foreign resident $10,00025 17
19 Studying and training:11
Remittances or allowances No limit Any foreign resident No limit 20

Page 49
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 Table 2. ( Continued)

Page 50
Category of Personal Services Maximum Maximum
Presence Amount of Treaty Article
Country Code1 Purpose in U.S. Required Employer or Payer Compensation Citation
(1) (2) (3) (4) (5) (6) (7)
Thailand 15 Scholarship or fellowship grant 5 years Any U.S. or foreign resident5 No limit 22(1)
16 Independent personal services7,22 89 days Any U.S. resident $10,000 15
89 days Any foreign contractor No limit49 15
20 Public entertainment22 No limit Any contractor $100 per day or
$3,000 p.a.48 19
17 Dependent personal services17,47 183 days Any foreign resident No limit 16
20 Public entertainment22 No limit Any U.S. or foreign resident $100 per day or
$3,000 p.a.48 19
18 Teaching or research4,38 2 years Any U.S. or foreign resident No limit 23
19 Studying and training:
Remittances or allowances 5 years Any foreign resident No limit 22(1)
Compensation during training 5 years Any U.S. or foreign resident $3,000 p.a. 22(1)
Compensation while gaining experience 12 consec. mos. Thai resident2 $7,500 22(2)
Compensation while under U.S.
Government program 1 year U.S. Government $10,00036 22(3)
Page 50 of 58 of Publication 515

Trinidad and Tobago 15 Scholarship or fellowship grant15 5 years Any U.S. or foreign resident5 No limit 19(1)
16 Independent personal services14,22 183 days Any foreign resident contractor No limit 17
183 days Any U.S. contractor $3,0006 17
17 Dependent personal services14 183 days Any foreign resident No limit 17
183 days Any U.S. resident $3,0006 17
18 Teaching4 2 years U.S. educational institution or U.S. Government No limit 18
19 Studying and training:
Remittances or allowances 5 years Any foreign resident No limit 19(1)
Compensation during training 5 years U.S. or any foreign resident $2,000 p.a.6 19(1)
Compensation during professional training 5 years U.S. or any foreign resident $5,000 p.a.6 19(1)
Compensation while gaining experience2 1 year Trinidad—Tobago resident $5,0006 19(2)
Compensation under U.S.
Government program 1 year U.S. Government or its contractor $10,0006 19(3)
Tunisia 15 Scholarship or fellowship grant11,15 5 years Any U.S. or foreign resident5 No limit 20
16 Independent personal services7,22 183 days U.S. resident contractor $7,500 p.a. 14
20 Public entertainment22 No limit Any contractor $7,500 p.a.25 17
17 Dependent personal services17 183 days Any foreign resident No limit 15
20 Public entertainment No limit Any U.S. or foreign resident $7,500 p.a.25 17
19 Studying and training:11
Remittances or allowances 5 years Any foreign resident No limit 20
Compensation during training 5 years Any U.S. or foreign resident $4,000 p.a. 20
Turkey 16 Independent personal services7 183 days Any contractor No limit 14
20 Public entertainment22,50 No limit Any contractor $3,00046 17
17 Dependent personal services12,17 183 days Any foreign resident No limit 15
20 Public entertainment22,50 No limit Any U.S. or foreign resident $3,00046 17
18 Teaching or research 2 years Any foreign resident No limit 20(2)
19 Studying and training:11
Remittances or allowances No limit Any foreign resident No limit 20(1)
Ukraine 15 Scholarship or fellowship grants41 5 years31 Any U.S. or foreign resident5 No limit 20
16 Independent personal services3,7 No limit Any contractor No limit 14
17 Dependent personal services3,17 183 days Any foreign resident No limit 15
19 Studying and training: 4
Remittances or allowances 5 years31 Any foreign resident No limit 20
United Kingdom 16 Independent personal services53
17 Dependent personal services12,17 183 days Any foreign resident No limit 14
20 Public entertainment22 No limit Any U.S. or foreign resident $20,000 p.a.25 16
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18 Teaching or research4 2 years U.S. educational institution No limit 20A

19 Studying and training:
Remittances or allowances11 No limit52 Any foreign resident No limit 20

Publication 515 (April 2008)

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Publication 515 (April 2008)
Page 51 of 58 of Publication 515

Table 2. ( Continued)
Category of Personal Services Maximum Maximum
Presence Amount of Treaty Article
Country Code1 Purpose in U.S. Required Employer or Payer Compensation Citation
(1) (2) (3) (4) (5) (6) (7)
Venezuela 15 Scholarship or fellowship grants4 5 years10 Any U.S. or foreign resident5 No limit 21(1)
16 Independent personal services7,12 No limit Any contractor No limit 14
20 Public entertainment22 No limit Any contractor $6,00030 18
12,17
17 Dependent personal services 183 days Any foreign resident No limit 15
20 Public entertainment22 No limit Any U.S. or foreign contractor $6,00030 18
18 Teaching4 2 years40 Any U.S. or foreign resident No limit 21(3)
19 Studying and training:4
Remittances or allowances 5 years10 Any foreign resident No limit 21(1)
Compensation during training 12 mos. Venezuelan resident $8,000 21(2)
10
Compensation while gaining 5 years Other foreign or U.S. resident $5,000 p.a. 21(1)
experience2 12 mos. Venezuelan resident $8,000 21(2)
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Page 51
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Page 52
1 18
Refers to income code numbers described in this publication
and to be reported on Forms 1042-S. Personal services must
be performed by a nonresident alien individual who is a resident
of the specified treaty country.
2 20
Applies only if training or experience is received from a person
other than the alien’s employer.
3 exceeding 2 years and who receive compensation from abroad.
The exemption does not apply to income received for
performing services in the United States as an entertainer or
a sportsman. However, this income is exempt from U.S. income
tax if the visit is (a) substantially supported by public funds of
Ukraine, its political subdivisions, or local authorities, or (b)
made under a specific arrangement agreed to by the
governments of the treaty countries.
4
Does not apply to income for research work primarily for
private benefit.
5 independent personal services, a n d Central withholding
Grant must be from a nonprofit organization. In many cases,
the exemption applies to amounts from either the U.S. or
foreign government. In the case of Indonesia and the
Netherlands, the exemption also applies if the amount is
awarded under a technical assistance program entered into by
the United States or foreign government, or its political
subdivisions or local authorities.
6 claimed the benefit of this Article, or (b) during the immediately
Reimbursed expenses are not taken into account in figuring
any maximum compensation to which the exemption applies.
For Trinidad and Tobago, only reimbursed travel expenses are
disregarded in figuring maximum compensation.
7 cannot exceed 5 years.
Exemption does not apply to the extent income is attributable
to the recipient’s fixed U.S. base. For residents of Belgium,
Iceland, Korea, and Norway, the fixed base must be maintained
for more than 182 days; for residents of Morocco, the fixed
base must be maintained for more than 89 days.
8 resident or the federal, state, or local government.
Does not apply to fees of a foreign director of a U.S.
corporation.
9 amount.
Does not apply to compensation for research work for other
than the U.S. educational institution involved.
10
Applies to any additional period that a full-time student needs
to complete the educational requirements as a candidate for
a postgraduate or professional degree from a recognized
educational institution.
11
Applies only to full-time student or trainee.
12
Fees paid to a resident of the treaty country for services
performed in the United States as a director of a U.S.
corporation are subject to U.S. tax.
13
Does not apply to compensation paid to public entertainers
(actors, artists, musicians, athletes, etc.).
14
Does not apply to compensation paid to public entertainers in
excess of $100 a day.
15
Does not apply to payments from the National Institutes of
Health under its Visiting Associate Program and Visiting
Scientist Program.
16
Exemption applies only if the compensation is subject to tax
in the country of residence.
17
The exemption does not apply if the employee’s compensation
is borne by a permanent establishment or in some cases a
fixed base that the employer has in the United States.
Publication 515 (April 2008)
The exemption also applies if the employer is a permanent
establishment in the treaty country.
19
Applies also to a participant in a program sponsored by the
U.S. government or an international organization.
The exemption is also extended to journalists and
correspondents who are temporarily in the U.S. for periods not
21
Also exempt are amounts of up to $10,000 received from U.S.
sources to provide ordinary living expenses. For students, the
amount will be less than $10,000, determined on a
case-by-case basis.
22
Withholding at 30% may be required because the factors on
which the treaty exemption is based may not be determinable
until after the close of the tax year. However, see Withholding
agreements, a n d Final payment exemption, under Pay for
agreements, under Artists and Athletes, discussed in this
publication.
23
A student or trainee may choose to be treated as a U.S. resident
for tax purposes. If the choice is made, it may not be revoked
without the consent of the U.S. competent authority.
24
Does not apply to amounts received in excess of reasonable
fees payable to all directors of the company for attending
meetings in the United States.
25
Exemption does not apply if gross receipts (including
reimbursements) exceed this amount during the year (or during
any 12-month period for Sweden).
26
Exemption does not apply if net income exceeds this amount.
27
Exemption does not apply to payments borne by a permanent
establishment in the United States or paid by a U.S. citizen or
28
Exemption does not apply if compensation exceeds this
29
The exemption applies only to income from activities
performed under special cultural exchange programs agreed
to by the U.S. and Chinese governments.
30
Exemption does not apply if gross receipts (or compensation
for Portugal), including reimbursements, exceed this amount
during the year. Income is fully exempt if visit to the United
States is substantially supported by public funds of the treaty
country or its political subdivisions or local authorities.
31
The 5-year limit pertains only to training or research.
32
Compensation from employment directly connected with a
place of business that is not a permanent establishment is
exempt if the alien is present in the United States for a
period not exceeding 12 consecutive months. Compensation
for technical services directly connected with the application
of a right or property giving rise to a royalty is exempt if the
services are provided as part of a contract granting the use
of the right or property.
33
Exemption does not apply if, during the immediately
preceding period, the individual claimed the benefits of
Article 21.
34
Exemption does not apply if, during the immediately preceding
period, the individual claimed the benefits of Article 22.
35
Exemption does not apply if the individual either (a) claimed
the benefit of Article 21(5) previously, or (b) during the
immediately preceding period, claimed the benefit of Article
21(1), (2), or (3).
36
Exemption applies only to compensation for personal services
performed in connection with, or incidental to, the individual’s
study, research, or training.
37
If the compensation exceeds $400 per day, the entertainer may
be taxed on the full amount. If the individual receives a fixed
amount for more than one performance, the amount is prorated
over the number of days the individual performs the services
(including rehearsals).
38
Exemption does not apply if during the immediately preceding
period, the individual derived any benefits of Article 22(1).
39
Exemption does not apply if during the immediately preceding
period, the individual derived any benefits of Article 24(1).
40
The combined period of benefits for teaching cannot exceed
5 tax years.
41
Applies to grants, allowances, and other similar payments
Page 52 of 58 of Publication 515
received for studying or doing research.
42
Exemption does not apply if the individual either (a) previously
preceding period, claimed the benefit of Article 23. The benefits
under Articles 22 and 23 cannot be claimed at the same time.
43
The combined period of benefits under Articles 20 and 21(1)
44
The exemption does not apply if the individual previously
claimed the benefit of this Article.
45
The time limit pertains only to an apprentice or business trainee.
46
Exemption does not apply if gross receipts exceed this amount.
47
Fees paid to a resident of the treaty country for services as a
director of a U.S. corporation are subject to U.S. tax, unless
the services are performed in the country of residence.
48
Exemption does not apply if gross receipts exceed this amount.
Income is fully exempt if visit to the United States is
substantially supported by public funds of the treaty country
or its political subdivisions or local authorities.
49
A $10,000 limit applies if the expense is borne by a permanent
establishment or a fixed base in the United States.
50
This provision does not apply if these activities are substantially
supported by a nonprofit organization of the treaty country or
by public funds of the treaty country or its political subdivisions
or local authorities.
51
Exemption does not apply if gross receipts, including
reimbursements, exceed this amount during the year. Income
is fully exempt if visit is wholly or mainly supported by public
funds of one or both or the treaty countries or their political
subdivisions or local authorities.
52
Exemption applies to business apprentice (trainee) only for a
period not exceeding 1 year (2 years for Belgium) from the date
of arrival in the United States.
53
Treated as business profits under Article 7 of the treaty.
54
Does not apply to an athlete employed with a team that is in
a league with regularly scheduled games in both countries.
55
Exemption does not apply if during the immediately preceding
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period, the individual claimed the benefit of Article 20(2), (3),
or (4).
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Table 3. List of Tax Treaties (Updated through December 31, 2007)

Applicable Treasury
Official Text General Explanations
Country Symbol1 Effective Date Citation or Treasury Decision (T.D.)
Australia TIAS 10773 Dec. 1, 1983 1986-2 C.B. 220 1986-2 C.B. 246
Protocol TIAS Jan. 1, 2004
Austria TIAS Jan. 1, 1999
Bangladesh TIAS Jan. 1, 2007
Barbados TIAS 11090 Jan. 1, 1984 1991-2 C.B. 436 1991-2 C.B. 466
Protocol TIAS Jan. 1, 2005
Belgium TIAS Jan. 1, 2008
Canada2 TIAS 11087 Jan. 1, 1985 1986-2 C.B. 258 1987-2 C.B. 298
Protocol TIAS Jan. 1, 1996
China, People’s Republic of TIAS 12065 Jan. 1, 1987 1988-1 C.B. 414 1988-1 C.B. 447
Commonwealth of Independent
States3 TIAS 8225 Jan. 1, 1976 1976-2 C.B. 463 1976-2 C.B. 475
Cyprus TIAS 10965 Jan. 1, 1986 1989-2 C.B. 280 1989-2 C.B. 314
Czech Republic TIAS Jan. 1, 1993
Denmark TIAS Jan. 1, 2001
Protocol TIAS Jan. 1, 2008
Egypt TIAS 10149 Jan. 1, 1982 1982-1 C.B. 219 1982-1 C.B. 243
Estonia TIAS Jan. 1, 2000
Finland TIAS 12101 Jan. 1, 1991
Protocol TIAS Jan. 1, 2008
France TIAS Jan. 1, 1996
Protocol TIAS Jan. 1, 2007
Germany TIAS Jan. 1, 1990
Protocol TIAS Jan. 1, 2008
Greece TIAS 2902 Jan. 1, 1953 1958-2 C.B. 1054 T.D. 6109, 1954-2 C.B. 638
Hungary TIAS 9560 Jan. 1, 1980 1980-1 C.B. 333 1980-1 C.B. 354
Iceland TIAS 8151 Jan. 1, 1976 1976-1 C.B. 442 1976-1 C.B. 456
India TIAS Jan. 1, 1991
Indonesia TIAS 11593 Jan. 1, 1990
Ireland TIAS Jan. 1, 1998
Israel TIAS Jan. 1, 1995
Italy TIAS 11064 Jan. 1, 1985 1992-1 C.B. 442 1992-1 C.B. 473
Jamaica TIAS 10207 Jan. 1, 1982 1982-1 C.B. 257 1982-1 C.B. 291
Japan TIAS Jan. 1, 2005
Kazakstan TIAS Jan. 1, 1996
Korea, Republic of TIAS 9506 Jan. 1, 1980 1979-2 C.B. 435 1979-2 C.B. 458
Latvia TIAS Jan. 1, 2000
Lithuania TIAS Jan. 1, 2000
Luxembourg TIAS Jan. 1, 2001
Mexico TIAS Jan. 1,1994
Protocol TIAS Jan. 1, 2004
Morocco TIAS 10195 Jan. 1, 1981 1982-2 C.B. 405 1982-2 C.B. 427
Netherlands TIAS Jan. 1, 1994
Protocol TIAS Jan. 1, 2005
New Zealand TIAS 10772 Nov. 2, 1983 1990-2 C.B. 274 1990-2 C.B. 303
Norway TIAS 7474 Jan. 1, 1971 1973-1 C.B. 669 1973-1 C.B. 693
Protocol TIAS 10205 Jan. 1, 1982 1982-2 C.B. 440 1982-2 C.B. 454
Pakistan TIAS 4232 Jan. 1, 1959 1960-2 C.B. 646 T.D. 6431, 1960-1 C.B. 755

Publication 515 (April 2008) Page 53

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Table 3. (continued)
Applicable Treasury
Official Text General Explanations
Country Symbol1 Effective Date Citation or Treasury Decision (T.D.)
Philippines TIAS 10417 Jan. 1, 1983 1984-2 C.B. 384 1984-2 C.B. 412
Poland TIAS 8486 Jan. 1, 1974 1977-1 C.B. 416 1977-1 C.B. 427
Portugal TIAS Jan. 1, 1996
Romania TIAS 8228 Jan. 1, 1974 1976-2 C.B. 492 1976-2 C.B. 504
Russia TIAS Jan. 1, 1994
Slovak Republic TIAS Jan. 1, 1993
Slovenia TIAS Jan. 1, 2002
South Africa TIAS Jan. 1, 1998
Spain TIAS Jan. 1, 1991
Sri Lanka TIAS Jan. 1, 2004
Sweden TIAS Jan. 1, 1996
Protocol TIAS Jan. 1, 2007
Switzerland TIAS Jan. 1, 1998
Thailand TIAS Jan. 1, 1998
Trinidad and Tobago TIAS 7047 Jan. 1, 1970 1971-2 C.B. 479
Tunisia TIAS Jan. 1, 1990
Turkey TIAS Jan. 1, 1998
Ukraine TIAS Jan. 1, 2001
United Kingdom TIAS Jan. 1, 2004
Venezuela TIAS Jan. 1, 2000
1 (TIAS) — Treaties and Other International Act Series.
2 Information on the treaty can be found in Publication 597, Information on the United States-Canada Income Tax Treaty.
3 The U.S.-U.S.S.R. income tax treaty applies to the countries of Armenia, Azerbaijan, Belarus, Georgia, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, and Uzbekistan.

How To Get Tax Help
You can get help with unresolved tax issues,
order free publications and forms, ask tax ques-
tions, and get information from the IRS in sev-
eral ways. By selecting the method that is best
for you, you will have quick and easy access to
tax help.
Contacting your Taxpayer Advocate. The
Taxpayer Advocate Service (TAS) is an inde-
pendent organization within the IRS whose em-
ployees assist taxpayers who are experiencing
economic harm, who are seeking help in resolv-
ing tax problems that have not been resolved
through normal channels, or who believe that an
IRS system or procedure is not working as it
should.
You can contact the TAS by calling the TAS
toll-free case intake line at 1-877-777-4778 or
TTY/TDD 1-800-829-4059 to see if you are eligi-
ble for assistance. You can also call or write to
your local taxpayer advocate, whose phone
number and address are listed in your local
telephone directory and in Publication 1546,
Taxpayer Advocate Service — Your Voice at
the IRS. You can file Form 911, Request for
Taxpayer Advocate Service Assistance (And
Application for Taxpayer Assistance Order), or
ask an IRS employee to complete it on your
behalf. For more information, go to www.irs.gov/
advocate.
Taxpayer Advocacy Panel (TAP). The
TAP listens to taxpayers, identifies taxpayer is-
sues, and makes suggestions for improving IRS
services and customer satisfaction. If you have
suggestions for improvements, contact the TAP,
toll free at 1-888-912-1227 or go to
www.improveirs.org.
Low Income Taxpayer Clinics (LITCs).
LITCs are independent organizations that pro-
vide low income taxpayers with representation
in federal tax controversies with the IRS for free
or for a nominal charge. The clinics also provide
tax education and outreach for taxpayers with
limited English proficiency or who speak English
as a second language. Publication 4134, Low
Income Taxpayer Clinic List, provides informa-
tion on clinics in your area. It is available at www.
irs.gov or at your local IRS office.
Free tax services. To find out what services
are available, get Publication 910, IRS Guide to
Free Tax Services. It contains a list of free tax
publications and describes other free tax infor-
mation services, including tax education and
assistance programs and a list of TeleTax top-
ics.
Accessible versions of IRS published prod-
ucts are available on request in a variety of
alternative formats for people with disabilities.
Internet. You can access the IRS web-
site at www.irs.gov 24 hours a day, 7
days a week to:
• E-file your return. Find out about commer-
cial tax preparation and e-file services
available free to eligible taxpayers.
• Check the status of your 2007 refund.
Click on Where’s My Refund. Wait at least
6 weeks from the date you filed your re-
turn (3 weeks if you filed electronically).
Have your 2007 tax return available be-
cause you will need to know your social
security number, your filing status, and the
exact whole dollar amount of your refund.
• Download forms, instructions, and publica-
tions.
• Order IRS products online.
• Research your tax questions online.
• Search publications online by topic or
keyword.
• View Internal Revenue Bulletins (IRBs)
published in the last few years.
• Figure your withholding allowances using
the withholding calculator online at
www.irs.gov/individuals.
• Determine if Form 6251 must be filed us-
ing our Alternative Minimum Tax (AMT)
Assistant.
• Sign up to receive local and national tax
news by email.
• Get information on starting and operating
a small business.
Phone. Many services are available by
phone.
• Ordering forms, instructions, and publica-
tions. Call 1-800-829-3676 to order cur-
rent-year forms, instructions, and
publications, and prior-year forms and in-
structions. You should receive your order
within 10 days.
• Asking tax questions. Call the IRS with
your tax questions at 1-800-829-1040.
• Solving problems. You can get
face-to-face help solving tax problems
every business day in IRS Taxpayer As-
sistance Centers. An employee can ex-
plain IRS letters, request adjustments to
your account, or help you set up a pay-
ment plan. Call your local Taxpayer Assis-
tance Center for an appointment. To find
the number, go to www.irs.gov/localcon-
tacts or look in the phone book under
United States Government, Internal Reve-
nue Service.
• TTY/TDD equipment. If you have access
to TTY/TDD equipment, call
1-800-829-4059 to ask tax questions or to
order forms and publications.

Page 54 Publication 515 (April 2008)

Page 55 of 58 of Publication 515
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• TeleTax topics. Call 1-800-829-4477 to lis-
ten to pre-recorded messages covering
various tax topics.
• Refund information. To check the status of
your 2007 refund, call 1-800-829-4477
and press 1 for automated refund informa-
tion or call 1-800-829-1954. Be sure to
wait at least 6 weeks from the date you
filed your return (3 weeks if you filed elec-
tronically). Have your 2007 tax return
available because you will need to know
your social security number, your filing
status, and the exact whole dollar amount
of your refund.
Evaluating the quality of our telephone
services. To ensure IRS representatives give
accurate, courteous, and professional answers,
we use several methods to evaluate the quality
of our telephone services. One method is for a
second IRS representative to listen in on or
record random telephone calls. Another is to ask
some callers to complete a short survey at the
end of the call.
Walk-in. Many products and services
are available on a walk-in basis.
• Products. You can walk in to many post
offices, libraries, and IRS offices to pick up
certain forms, instructions, and publica-
tions. Some IRS offices, libraries, grocery
stores, copy centers, city and county gov-
ernment offices, credit unions, and office
supply stores have a collection of products
available to print from a CD or photocopy
from reproducible proofs. Also, some IRS
offices and libraries have the Internal Rev-
enue Code, regulations, Internal Revenue
Bulletins, and Cumulative Bulletins avail-
able for research purposes.
• Services. You can walk in to your local
Taxpayer Assistance Center every busi-
ness day for personal, face-to-face tax
help. An employee can explain IRS letters,
request adjustments to your tax account,
or help you set up a payment plan. If you
need to resolve a tax problem, have ques-
tions about how the tax law applies to your
Publication 515 (April 2008)
individual tax return, or you’re more com-
fortable talking with someone in person,
visit your local Taxpayer Assistance
Center where you can spread out your
records and talk with an IRS representa-
tive face-to-face. No appointment is nec-
essary, but if you prefer, you can call your
local Center and leave a message re-
questing an appointment to resolve a tax
account issue. A representative will call
you back within 2 business days to sched-
ule an in-person appointment at your con-
venience. To find the number, go to www.
irs.gov/localcontacts or look in the phone
book under United States Government, In-
ternal Revenue Service.
Mail. You can send your order for
forms, instructions, and publications to
the address below. You should receive
a response within 10 days after your request is
received.
National Distribution Center
P.O. Box 8903
Bloomington, IL 61702-8903
CD/DVD for tax products. You can
order Publication 1796, IRS Tax Prod-
ucts CD/DVD, and obtain:
• Current-year forms, instructions, and pub-
lications.
• Prior-year forms, instructions, and publica-
tions.
• Bonus: Historical Tax Products DVD -
Ships with the final release.
• Tax Map: an electronic research tool and
finding aid.
• Tax law frequently asked questions.
• Tax Topics from the IRS telephone re-
sponse system.
• Fill-in, print, and save features for most tax
forms.
• Internal Revenue Bulletins.
• Toll-free and email technical support.
11:14 - 23-APR-2008
• The CD which is released twice during the
year.
– The first release will ship the beginning
of January 2008.
– The final release will ship the beginning
of March 2008.
Purchase the CD/DVD from National Techni-
cal Information Service (NTIS) at www.irs.gov/
cdorders for $35 (no handling fee) or call
1-877-CDFORMS (1-877-233-6767) toll free to
buy the CD/DVD for $35 (plus a $5 handling
fee). Price is subject to change.
CD for small businesses. Publication
3207, The Small Business Resource
Guide CD for 2007, is a must for every
small business owner or any taxpayer about to
start a business. This year’s CD includes:
• Helpful information, such as how to pre-
pare a business plan, find financing for
your business, and much more.
• All the business tax forms, instructions,
and publications needed to successfully
manage a business.
• Tax law changes for 2007.
• Tax Map: an electronic research tool and
finding aid.
• Web links to various government agen-
cies, business associations, and IRS orga-
nizations.
• “Rate the Product” survey — your opportu-
nity to suggest changes for future editions.
• A site map of the CD to help you navigate
the pages of the CD with ease.
• An interactive “Teens in Biz” module that
gives practical tips for teens about starting
their own business, creating a business
plan, and filing taxes.
An updated version of this CD is available
each year in early April. You can get a free copy
by calling 1-800-829-3676 or by visiting www.irs.
gov/smallbiz.
Page 55
Page 56 of 58 of Publication 515
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To help us develop a more useful index, please let us know if you have ideas for index entries.
Index See “Comments and Suggestions” in the “Introduction” for the ways you can reach us.
10% owners . . . . . . . . . . . . . . . . . 17
80/20 company . . . . . . . . . . . . . . 19
501(c) organizations . . . . . . . . . 27
A 12, 14
Acceptance agent . . . . . . . . . . . 28
Accounts, offshore . . . . . . . . . . . 8
Alien:
Illegal . . . . . . . . . . . . . . . . . . . . . . 22
Nonresident . . . . . . . . . . . . . . . . . 6
Resident . . . . . . . . . . . . . . . . . . . . 6
Alimony . . . . . . . . . . . . . . . . . 20, 21
Allocation information . . . . . . . 10
Alternative procedure . . . . . . . 10
American Samoa . . . . . . . . . . . . . 7
Amount to withhold . . . . . . . . . . 3
Annuities . . . . . . . . . . . . . . . . . . . . 20
Artists and athletes:
Earnings of . . . . . . . . . . . . . . . . 26
Special events and
promotions . . . . . . . . . . . . . . 26
Assistance (See Tax help)
Awards . . . . . . . . . . . . . . . . . . . . . . 22
B Graduated rates . . . . . . . . . . . . . 26
Backup withholding . . . . . . . . 3, 9
Banks, interest received
by . . . . . . . . . . . . . . . . . . . . . . . . . 17
Beneficial owner . . . . . . . . . . . . . 8
Bonds sold between interest
dates . . . . . . . . . . . . . . . . . . . . . . 19
Branch profits tax . . . . . . . . . . . 20
C International
Canada . . . . . . . . . . . . . . . . . . 25, 30
Capital gains . . . . . . . . . . . . . . . . 20
Central withholding
agreements . . . . . . . . . . . . . . . 27
Comments on publication . . . . 2
Consent dividends . . . . . . 19, 20
Contingent interest . . . . . . . . . . 18
Controlled foreign corporations,
interest paid to . . . . . . . . . . . . 18
Controlling foreign
corporations . . . . . . . . . . . . . . 18
Coupons, federal tax
deposit . . . . . . . . . . . . . . . . . . . . 29
Covenant not to
compete . . . . . . . . . . . . . . . . . . 15
Crew members . . . . . . . . . . . . . . 15
D Person . . . . . . . . . . . . . . . . . . . . . 6
Dependent personal
services . . . . . . . . . . . . . . . . . . . 25
Allowance for personal
exemptions . . . . . . . . . . . . . . 24
Defined . . . . . . . . . . . . . . . . . . . . 25
Exempt from withholding . . . . 25
Depositing taxes:
How to . . . . . . . . . . . . . . . . . . . . . 28
When to . . . . . . . . . . . . . . . . . . . 29
Deposits . . . . . . . . . . . . . . . . . . . . 18
Disregarded entities . . . . . . . . . . 4
Page 56
Dividends:
Direct dividend rate . . . . . . . . . 19
Domestic corporation . . . . . . . 19
Foreign corporations . . . . . . . . 20
In general . . . . . . . . . . . . . . . . . . 19
Documentary evidence . . . . . . . 8,
Documentation:
From foreign beneficial owners
and U.S. payees . . . . . . . . . . 7
From foreign intermediaries and
foreign flow-through
entities . . . . . . . . . . . . . . . . . . . 9
Presumptions in the absence
of . . . . . . . . . . . . . . . . . . . . . . . 14
Qualified intermediaries . . . . . . 6
E W-8ECI . . . . . . . . . . . . . . . . . . . . . 8
Effectively connected
income . . . . . . . . . . . . . . . . . . . . 16
Defined . . . . . . . . . . . . . . . . . . . . 16
Foreign partners . . . . . . . . . . . 31
EFTPS . . . . . . . . . . . . . . . . . . . . 2, 29
Electronic deposit rules . . . . . . 2,
29
Employee . . . . . . . . . . . . . . . . . . . 24
Employees . . . . . . . . . . . . . . . . . . 14
Employer . . . . . . . . . . . . . . . . . . . . 24
F Grants . . . . . . . . . . . . . . . . . . 21, 22
Federal tax deposit
coupons . . . . . . . . . . . . . . . . . . 29
Federal unemployment
tax . . . . . . . . . . . . . . . . . . . . . . . . 25
Fellowship grants . . . . . . . . . . . 21
Fellowship income . . . . . . . . . . 15
Financial institutions . . . . . . . . . 5
FIRPTA withholding . . . . . . . 4, 33
Fiscally transparent entity . . . . 5
Fixed or determinable annual or
periodic income . . . . . . . . . . . 15
Flow-through entities . . . . . . 4, 10
Foreign . . . . . . . . . . . . . . . . . . . . . 32
501(c) organizations . . . . . . . . 27
Bank . . . . . . . . . . . . . . . . . . . . 6, 16
Charitable organizations . . . . . 7
Corporations . . . . . . . . . . . . . . . . 7
Governments . . . . . . . . . . . . . . 27
Insurance company . . . . . . 6, 16
Intermediary . . . . . . . . . . . . . . . . 5
Organizations and
associations . . . . . . . . . . . . . . 7
Partner . . . . . . . . . . . . . . . . . . . . 31
Partnerships,
nonwithholding . . . . . . . . . . . . 4
Private foundation . . . . . . . . 7, 27
Status . . . . . . . . . . . . . . . . . . . . . 12
Trusts . . . . . . . . . . . . . . . . . . . . . . 5
Form:
940 . . . . . . . . . . . . . . . . . . . . . . . . 25
941 . . . . . . . . . . . . . . . . . . . . . . . . 25
972 . . . . . . . . . . . . . . . . . . . . . . . . 19
1042 . . . . . . . . . . . . . . . . 3, 11, 30
1042-S . . . . . . . . . . . . 3, 6, 11, 30
1099 . . . . . . . . . . . . . . . . . . . . . 3, 9
1099-S . . . . . . . . . . . . . . . . . . . . 35
2758 . . . . . . . . . . . . . . . . . . . . . . 31
4419 . . . . . . . . . . . . . . . . . . . . . . 30
8109 . . . . . . . . . . . . . . . . . . . . . . 29
8233 . . . . . . . . . . . . . . . . . . . . . . 23
8288 . . . . . . . . . . . . . . . . . . . . . . 35
8288-A . . . . . . . . . . . . . . . . . . . . 35
8288-B . . . . . . . . . . . . . . . . . . . . 35
8804 . . . . . . . . . . . . . . . . . . . . . . 32
8805 . . . . . . . . . . . . . . . . . . . . . . 32
8813 . . . . . . . . . . . . . . . . . . . . . . 32
8833 . . . . . . . . . . . . . . . . . . . . . . . 8
SS-4 . . . . . . . . . . . . . . . . . . . . . . 28
SS-5 . . . . . . . . . . . . . . . . . . . . . . 28
W-2 . . . . . . . . . . . . . . . . . . . . . . . 25
W-4 . . . . . . . . . . . . . . . . 21, 23, 24
W-7 . . . . . . . . . . . . . . . . . . . . . . . 28
W-8 . . . . . . . . . . . . . . . . . . . . . . . . 2
W-8BEN . . . . . . . . . . . . . . . . . . . . 8
W-8EXP . . . . . . . . . . . . . . . . . . . . 9
W-8IMY . . . . . . . . . . . . . . . . . . . . 9
W-9 . . . . . . . . . . . . . . . . . . . . . . . 28
Free tax services . . . . . . . . . . . . 54
FUTA . . . . . . . . . . . . . . . . . . . . . . . . 25
G
Gambling winnings . . . . . . . . . . 27
Graduated withholding . . . . . . 24
Grant income . . . . . . . . . . . . . . . . 15
Green card test . . . . . . . . . . . . . . . 6
Guam . . . . . . . . . . . . . . . . . . . . . . . . 7
H Qualified . . . . . . . . . . . . . . . . . . 5, 9
Help (See Tax help)
I ITIN . . . . . . . . . . . . . . . . . . . . . . . 2, 28
Identification number,
taxpayer . . . . . . . . . . . . . . 28, 32
Illegal aliens . . . . . . . . . . . . . . . . . 22
Important reminders . . . . . . . . . 2
Income:
Fixed or determinable annual or
periodical . . . . . . . . . . . . . . . . 15
Interest . . . . . . . . . . . . . . . . . . . . 17
Notional principal
contract . . . . . . . . . . . . . . . . . 16
Other than effectively
connected . . . . . . . . . . . . . . . 17
Personal service . . . . . . . . . . . 14
Source of . . . . . . . . . . . . . . . . . . 14
Transportation . . . . . . . . . . . . . 27
Income code:
01 . . . . . . . . . . . . . . . . . . . . . . . . . 17
02 . . . . . . . . . . . . . . . . . . . . . . . . . 18
03 . . . . . . . . . . . . . . . . . . . . . . . . . 18
04 . . . . . . . . . . . . . . . . . . . . . . . . . 18
06 . . . . . . . . . . . . . . . . . . . . . . . . . 19
07 . . . . . . . . . . . . . . . . . . . . . . . . . 19
08 . . . . . . . . . . . . . . . . . . . . . . . . . 20
09 . . . . . . . . . . . . . . . . . . . . . . . . . 20
10 . . . . . . . . . . . . . . . . . . . . . . . . . 20
11 . . . . . . . . . . . . . . . . . . . . . . . . . 20
12 . . . . . . . . . . . . . . . . . . . . . . . . . 20
13 . . . . . . . . . . . . . . . . . . . . . . . . . 20
14 . . . . . . . . . . . . . . . . . . . . . . . . . 20
11:14 - 23-APR-2008
15 . . . . . . . . . . . . . . . . . . . . . . . . . 21
16 . . . . . . . . . . . . . . . . . . . . . . . . . 23
17 . . . . . . . . . . . . . . . . . . . . . . . . . 25
18 . . . . . . . . . . . . . . . . . . . . . . . . . 26
19 . . . . . . . . . . . . . . . . . . . . . . . . . 26
20 . . . . . . . . . . . . . . . . . . . . . . . . . 26
24 . . . . . . . . . . . . . . . . . . . . . . . . . 35
25 . . . . . . . . . . . . . . . . . . . . . . . . . 35
26 . . . . . . . . . . . . . . . . . . . . . . . . . 35
27 . . . . . . . . . . . . . . . . . . . . . . . . . 32
28 . . . . . . . . . . . . . . . . . . . . . . . . . 27
29 . . . . . . . . . . . . . . . . . . . . . . . . . 18
30 . . . . . . . . . . . . . . . . . . . . . . . . . 17
50 . . . . . . . . . . . . . . . . . . . . . . . . . 27
Independent personal services:
Defined . . . . . . . . . . . . . . . . . . . . 23
Exempt from withholding . . . . 23
India . . . . . . . . . . . . . . . . . . . . . . . . 25
Indirect account holders . . . . 13
Installment payment . . . . . 15, 32
Insurance proceeds . . . . . . . . . 15
Interest:
Contingent . . . . . . . . . . . . . . . . . 18
Controlling foreign
corporations . . . . . . . . . . . . . 18
Deposits . . . . . . . . . . . . . . . . . . . 18
Foreign business
arrangements . . . . . . . . . . . . 18
Foreign corporations . . . . . . . . 18
Income . . . . . . . . . . . . . . . . . . . . 17
Portfolio . . . . . . . . . . . . . . . . . . . 17
Real property
mortgages . . . . . . . . . . . . . . . 18
Intermediary:
Foreign . . . . . . . . . . . . . . . . . . . . . 5
Nonqualified . . . . . . . . . . . . . . . . 5
organizations . . . . . . . . . . . . . 27
K
Knowledge, standards of . . . . 11
L
Liability of withholding
agent . . . . . . . . . . . . . . . . . . . . . . 3
M
Magnetic media
reporting . . . . . . . . . . . . . . . . . . 30
Marketable securities . . . . . . . . . 8
Mexico . . . . . . . . . . . . . . . . . . . . . . 25
Missing children . . . . . . . . . . . . . 2
More information (See Tax help)
Mortgages . . . . . . . . . . . . . . . . . . . 18
N
Nonqualified
intermediary . . . . . . . . . . . . 5, 10
Non-registered
obligations . . . . . . . . . . . . . . . . 17
Nonresident alien:
Defined . . . . . . . . . . . . . . . . . . . . . 6
Married to U.S. citizen or
resident . . . . . . . . . . . . . . . . . . 6
Publication 515 (April 2008)
Page 57 of 58 of Publication 515
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
Nonwage pay . . . . . . . . . . . . . . . . 24
Northern Mariana Islands . . . . . 7
Notional principal contract
income . . . . . . . . . . . . . . . . . . . . 16
NRA withholding:
In general . . . . . . . . . . . . . . . . . . . 3
Income subject to . . . . . . . . . . 14
Persons subject to . . . . . . . . . . . 4
O U.S. Virgin Islands . . . . . . . . . . . 7
Obligations:
Not in registered form . . . . . . . 17
Registered . . . . . . . . . . . . . . . . . 17
Offshore accounts . . . . . . . . . . . 8
Original issue discount . . . . . . 17
Overwithholding, adjustment
for . . . . . . . . . . . . . . . . . . . . . . . . 29
P Q
Partner . . . . . . . . . . . . . . . . . . . . . . 32
Partner, foreign . . . . . . . . . . . . . 31
Partnerships:
Effectively connected income of
foreign partners . . . . . . . . . . 31
Foreign . . . . . . . . . . . . . . . . . . . . . 4
Publicly traded . . . . . . . . . . . . . 32
Smaller . . . . . . . . . . . . . . . . . . 9, 11
Withholding foreign . . . . . . . 6, 10
Pay for personal services:
Artists and athletes . . . . . . . . . 26
Dependent personal
services . . . . . . . . . . . . . . . . . 25
Employees . . . . . . . . . . . . . . . . . 24
Exempt from withholding . . . . 22
Independent personal
services . . . . . . . . . . . . . . . . . 23
Salaries and wages . . . . . . . . 24
Scholarship or fellowship
recipient . . . . . . . . . . . . . . . . . 22
Studying . . . . . . . . . . . . . . . . . . . 26
Teaching . . . . . . . . . . . . . . . . . . 26
Training . . . . . . . . . . . . . . . . . . . 26
Payee . . . . . . . . . . . . . . . . . . . . . . . . 4
Penalties:
Deposit . . . . . . . . . . . . . . . . . . . . 29
Form 1042 . . . . . . . . . . . . . . . . . 31
Form 8804 . . . . . . . . . . . . . . . . . 32
Form 8805 . . . . . . . . . . . . . . . . . 32
Magnetic media . . . . . . . . . . . . 31
Trust fund recovery . . . . . . . . . 25
Pensions . . . . . . . . . . . . . . . . 15, 20
Publication 515 (April 2008)
Per diem . . . . . . . . . . . . . . . . . . . . 22
Personal service income . . . . 14
Pooled withholding
information . . . . . . . . . . . . . . . 10
Portfolio interest . . . . . . . . . . . . 17
Presumption:
Corporation . . . . . . . . . . . . . . . . 14
Individual . . . . . . . . . . . . . . . . . . 14
Partnership . . . . . . . . . . . . . . . . 14
Rules . . . . . . . . . . . . . . . . . . . . . . 14
Trust . . . . . . . . . . . . . . . . . . . . . . 14
Private foundation,
foreign . . . . . . . . . . . . . . . . . . . . . 7
Prizes . . . . . . . . . . . . . . . . . . . . . . . 22
Procedure, alternative . . . . . . . 10
Publications (See Tax help)
Puerto Rico . . . . . . . . . . . . . . . 7, 26
QI withholding agreement . . . . 6
Qualified intermediary . . . . . . 5, 9
Qualified investment entity
(QIE):
Distributions paid by . . . . . . . . 34
Dividends paid by . . . . . . . . . . 19
R Tax-exempt entities . . . . . . . . . 27
Racing purses . . . . . . . . . . . . . . . 15
Real property interest:
Disposition of . . . . . . . . . . . . . . 33
Withholding certificates . . . . . 35
Reason to know . . . . . . . . . . . . . 12
Refund procedures:
Qualified intermediaries . . . . . . 6
Registered obligations . . . . . . 17
Researchers . . . . . . . . . . . . . . . . 26
Residency . . . . . . . . . . . . . . . . . . . 30
Resident alien defined . . . . . . . . 6
Returns required . . . . . . . . . . . . 30
Royalties . . . . . . . . . . . . . . . . . . . . 20
Ryukyu Islands . . . . . . . . . . . . . . 19
S Students . . . . . . . . . . . . . . . . . . . 26
Salaries . . . . . . . . . . . . . . . . . . . . . 24
Saving clause . . . . . . . . . . . . . . . 22
Scholarship . . . . . . . . . . . . . 15, 21
Securities . . . . . . . . . . . . . . . . . 8, 16
Services performed outside the
U.S. . . . . . . . . . . . . . . . . . . . . . . . 24
Short-term obligation . . . . . . . . 19
Social security . . . . . . . . . . . . . . 26
Source of income . . . . . . . . . . . 14
Standards of knowledge . . . . . 11
Substantial presence test . . . . 6
Suggestions for
publication . . . . . . . . . . . . . . . . . 2
T
Tax:
Reporting and paying . . . . . . . 32
Tax help . . . . . . . . . . . . . . . . . . . . . 54
Tax treaties:
Claiming benefits . . . . . . . . . . . . 8
Dependent personal
services . . . . . . . . . . . . . . . . . 26
Entertainers and
athletes . . . . . . . . . . . . . . . . . . 27
Gains . . . . . . . . . . . . . . . . . . . . . . 20
Gambling winnings . . . . . . . . . 27
Independent personal
services . . . . . . . . . . . . . . . . . 24
Student . . . . . . . . . . . . . . . . . . . . 22
Students and trainees . . . . . . 26
Table of . . . . . . . . . . . . . . . 53, 54
Tables . . . . . . . . . . . . . . . . . . . . . 36
Teaching . . . . . . . . . . . . . . . . . . 26
Taxpayer Advocate . . . . . . . . . . 54
Taxpayer identification
number . . . . . . . . . . . . . 2, 28, 32
Exceptions . . . . . . . . . . . . . . . . . 28
Teachers . . . . . . . . . . . . . . . . . . . . 26
Ten-percent owners . . . . . . . . . 17
Territorial limits . . . . . . . . . . . . . 15
TIN . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Totalization agreements . . . . . 26
Transportation income . . . . . . 27
Travel expenses . . . . . . . . . . . . . 23
Trust Territory of the Pacific
Islands . . . . . . . . . . . . . . . . . . . . 19
Trusts:
Foreign . . . . . . . . . . . . . . . . . . . . . 5
Smaller . . . . . . . . . . . . . . . . . . . . . 9
Withholding foreign . . . . . . . 6, 11
TTY/TDD information . . . . . . . . 54
U
U.S. agent of foreign
person . . . . . . . . . . . . . . . . . . . . . 4
11:14 - 23-APR-2008
U.S. branch:
Foreign bank . . . . . . . . . . . . . 6, 16
Foreign insurance
company . . . . . . . . . . . . . . 6, 16
Foreign person . . . . . . . . . . . . . . 7
U.S. national . . . . . . . . . . . . . . . . 23
U.S. real property interest . . . . 4
U.S. savings bonds . . . . . . . . . . 19
U.S. territorial limits . . . . . . . . . 15
Unexpected payment . . . . . . . . 28
W
Wages:
Paid to employees . . . . . . . . . . 24
Pay that is not . . . . . . . . . . . . . . 24
When to withhold . . . . . . . . . . . . 3
Withhold, amount to . . . . . . . . . . 3
Withhold, when to . . . . . . . . . . . . 3
Withholding:
Agreements . . . . . . . . . . 6, 23, 27
Certificate . . . . . . . . . . . . . . 12, 13
Rate pool . . . . . . . . . . . . . . . . . . 10
Real property . . . . . . . . . . . . . . 33
Withholding agent:
Defined . . . . . . . . . . . . . . . . . . . . . 3
Liability . . . . . . . . . . . . . . . . . . . . . 3
Returns required . . . . . . . . . . . 30
Tax deposit
requirements . . . . . . . . . . . . . 28
Withholding exemptions and
reductions:
Dependent personal
services . . . . . . . . . . . . . . . . . 25
Exemption . . . . . . . . . . . . . . . . . 16
Final payment
exemption . . . . . . . . . . . . . . . 23
Foreign governments . . . . . . . 27
International
organizations . . . . . . . . . . . . 27
Real property interest . . . . . . . 35
Researchers . . . . . . . . . . . . . . . 26
Scholarships and fellowship
grants . . . . . . . . . . . . . . . . . . . 21
Withholding
agreements . . . . . . . . . . 23, 27
■
Page 57
Page 58 of 58 of Publication 515 11:14 - 23-APR-2008

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

See How To Get Tax Help for a variety of ways to get publications, including
Tax Publications for Individual Taxpayers by computer, phone, and mail.

General Guides
1 Your Rights as a Taxpayer
17 Your Federal Income Tax (For
Individuals)
334 Tax Guide for Small Business (For
Individuals Who Use Schedule C or
C-EZ)
509 Tax Calendars for 2008
553 Highlights of 2007 Tax Changes
910 IRS Guide to Free Tax Services
Specialized Publications
3 Armed Forces’ Tax Guide
54 Tax Guide for U.S. Citizens and
Resident Aliens Abroad
225 Farmer’s Tax Guide
463 Travel, Entertainment, Gift, and Car
Expenses
501 Exemptions, Standard Deduction, and
Filing Information
502 Medical and Dental Expenses (Including
the Health Coverage Tax Credit)
503 Child and Dependent Care Expenses
504 Divorced or Separated Individuals
505 Tax Withholding and Estimated Tax
514 Foreign Tax Credit for Individuals
516 U.S. Government Civilian Employees
Stationed Abroad
517 Social Security and Other Information
for Members of the Clergy and
Religious Workers
519 U.S. Tax Guide for Aliens
521 Moving Expenses
523 Selling Your Home
524 Credit for the Elderly or the Disabled
525 Taxable and Nontaxable Income
526 Charitable Contributions
527 Residential Rental Property (Including
Rental of Vacation Homes)
529 Miscellaneous Deductions
530 Tax Information for First-Time
Homeowners
531 Reporting Tip Income
536 Net Operating Losses (NOLs) for
Individuals, Estates, and Trusts
537 Installment Sales
541 Partnerships
544 Sales and Other Dispositions of Assets
547 Casualties, Disasters, and Thefts
550 Investment Income and Expenses
(Including Capital Gains and Losses)
551 Basis of Assets
552 Recordkeeping for Individuals
554 Tax Guide for Seniors
555 Community Property
556 Examination of Returns, Appeal Rights,
and Claims for Refund
559 Survivors, Executors, and
Administrators
561 Determining the Value of Donated
Property
564 Mutual Fund Distributions
570 Tax Guide for Individuals With Income
From U.S. Possessions
571 Tax-Sheltered Annuity Plans (403(b)
Plans) For Employees of Public
Schools and Certain Tax-Exempt
Organizations
575 Pension and Annuity Income
584 Casualty, Disaster, and Theft Loss
Workbook (Personal-Use Property)
587 Business Use of Your Home (Including
Use by Daycare Providers)
590 Individual Retirement Arrangements
(IRAs)
593 Tax Highlights for U.S. Citizens and
Residents Going Abroad
594 The IRS Collection Process
596 Earned Income Credit (EIC)
721 Tax Guide to U.S. Civil Service
Retirement Benefits
901 U.S. Tax Treaties
907 Tax Highlights for Persons with
Disabilities
908 Bankruptcy Tax Guide
915 Social Security and Equivalent
Railroad Retirement Benefits
919 How Do I Adjust My Tax Withholding?
925 Passive Activity and At-Risk Rules
926 Household Employer’s Tax Guide For
Wages Paid in 2008
929 Tax Rules for Children and
Dependents
936 Home Mortgage Interest Deduction
946 How To Depreciate Property
947 Practice Before the IRS and
Power of Attorney
950 Introduction to Estate and Gift Taxes
967 The IRS Will Figure Your Tax
969 Health Savings Accounts and Other
Tax-Favored Health Plans
970 Tax Benefits for Education
971 Innocent Spouse Relief
972 Child Tax Credit
1542 Per Diem Rates (For Travel Within the
Continental United States)
1544 Reporting Cash Payments of Over
$10,000 (Received in a Trade or
Business)
1546 Taxpayer Advocate Service – Your
Voice at the IRS
Spanish Language Publications
1SP Derechos del Contribuyente
579SP Cómo Preparar la Declaración de
Impuesto Federal
594SP Que es lo que Debemos Saber sobre
el Proceso de Cobro del IRS
596SP Crédito por Ingreso del Trabajo
850 English-Spanish Glossary of Words
and Phrases Used in Publications
Issued by the Internal Revenue
Service
1544SP Informe de Pagos en Efectivo en
Exceso de $10,000 (Recibidos en
una Ocupación o Negocio)

Commonly Used Tax Forms See How To Get Tax Help for a variety of ways to get forms, including by computer, phone, and mail.

Form Number and Title Form Number and Title

1040 U.S. Individual Income Tax Return 2106 Employee Business Expenses
Sch A&B Itemized Deductions & Interest and 2106-EZ Unreimbursed Employee Business
Ordinary Dividends Expenses
Sch C Profit or Loss From Business 2210 Underpayment of Estimated Tax by
Sch C-EZ Net Profit From Business Individuals, Estates, and Trusts
Sch D Capital Gains and Losses 2441 Child and Dependent Care Expenses
Sch D-1 Continuation Sheet for Schedule D 2848 Power of Attorney and Declaration of
Sch E Supplemental Income and Loss Representative
Sch EIC Earned Income Credit 3903 Moving Expenses
Sch F Profit or Loss From Farming 4562 Depreciation and Amortization
Sch H Household Employment Taxes 4868 Application for Automatic Extension of Time
Sch J Income Averaging for Farmers and Fishermen To File U.S. Individual Income Tax Return
4952 Investment Interest Expense Deduction
Sch R Credit for the Elderly or the Disabled
Sch SE Self-Employment Tax 5329 Additional Taxes on Qualified Plans (Including
IRAs) and Other Tax-Favored Accounts
1040A U.S. Individual Income Tax Return
6251 Alternative Minimum Tax—Individuals
Sch 1 Interest and Ordinary Dividends for
Form 1040A Filers 8283 Noncash Charitable Contributions
Sch 2 Child and Dependent Care 8582 Passive Activity Loss Limitations
Expenses for Form 1040A Filers 8606 Nondeductible IRAs
Sch 3 Credit for the Elderly or the 8812 Additional Child Tax Credit
Disabled for Form 1040A Filers 8822 Change of Address
1040EZ Income Tax Return for Single and 8829 Expenses for Business Use of Your Home
Joint Filers With No Dependents 8863 Education Credits (Hope and Lifetime Learning
1040-ES Estimated Tax for Individuals Credits)
1040X Amended U.S. Individual Income Tax Return 9465 Installment Agreement Request

Page 58 Publication 515 (April 2008)